Catastrophe Reinsurance Program

Effective June 1, 2021 to May 31, 2022

Northbrook, IL, May 5, 2021 - In the first quarter of 2021, we completed the placement of portions of our 2021- 2022 catastrophe reinsurance program (1) that provide reinsurance protection to the Allstate Protection businesses of The Allstate Corporation (NYSE: ALL). The placement of the balance of the program will be completed in the second quarter of 2021.

The catastrophe reinsurance program is part of our catastrophe management strategy, which is intended to provide our shareholders with an acceptable return on the risks assumed in our personal lines business, reduce earnings variability, and provide protection to our customers. Our 2021 reinsurance program will continue to support our risk tolerance framework that targets less than a 1% likelihood of annual aggregate catastrophe losses from hurricanes and earthquakes, net of reinsurance, exceeding $2 billion, based on modeled assumptions and applications currently used.

Allstate's catastrophe reinsurance program materially reduces our exposure to wind and earthquake losses. Except for certain contracts, which reinsure specific perils, our 2021 program will address these exposures by including coverage in our agreements for multiple perils, in addition to hurricanes and earthquakes. We employ a multi-year approach to placing reinsurance coverage to lessen the amount of reinsurance being placed in the market in any one year. Claim adjustment fees are indemnified as a percentage of ultimate net loss and are included within each contract's reinsurance limit.

The reinsurance agreements have been placed in the traditional reinsurance and insurance linked securities ("ILS") markets. In doing so, we consider a number of factors including coverage, cost, terms, and the period of protection. All reinsurers participating on our program have an A.M. Best insurance financial strength rating of A- or better, except one, that is not rated by A.M. Best. Additionally, all reinsurance agreements placed in the ILS markets are collateralized.

The total cost of our catastrophe reinsurance was $113 million and $99 million in the first quarter of 2021 and 2020, respectively. The total cost of our catastrophe reinsurance program during 2020 was $425 million.

The following pages summarize the newly placed and/or in-force portions of our June 1, 2021 to May 31, 2022 reinsurance program which includes:

  • Nationwide Excess Catastrophe Reinsurance Program
  • New Jersey Excess Catastrophe Reinsurance Agreement
  • National General Stand-Alone Catastrophe Reinsurance Contracts
  • Kentucky Earthquake Excess Catastrophe Reinsurance Contract
  • Excess & Surplus Earthquake Contract
  • Florida Excess Catastrophe Reinsurance Program

____________________________

  1. A reinsurance program comprises one or more reinsurance agreements and a reinsurance agreement comprises one or more reinsurance contracts

1

Nationwide Excess Catastrophe Reinsurance Program

The Nationwide Excess Catastrophe Reinsurance Program (the "Nationwide Program") provides coverage up to $5.763 billion of loss less a $500 million retention and is subject to the percentage of reinsurance placed in each of its agreements. The agreements comprising the Nationwide Program are described below.

Per Occurrence and Aggregate Excess Agreements

The Nationwide Program includes occurrence coverage in contracts from both the traditional reinsurance and ILS markets, while aggregate protection is included in three contracts supported by the ILS market. The agreements provide multi-line catastrophe coverage in every state except Florida, where coverage is only provided for personal lines automobile.

The Nationwide Program includes agreements providing coverage up to $3.250 billion in excess of a $500 million retention. The Program also provides reinsurance capacity above $3.750 billion through utilization of Sanders Re Catastrophe Bonds and multi-year contracts placed within the traditional market. Allstate will be placing additional limit in the second quarter to address capacity gaps that change each year. These contracts will be placed prior to and will be effective June 1, 2021.

2

Traditional Reinsurance Market Per Occurrence Excess Agreements

The Per Occurrence Excess Agreements placed in the traditional reinsurance market in the first quarter consist of four contracts providing coverage of $3.250 billion in excess of a $500 million retention and exhausting at $3.750 billion per loss occurrence and two eight-year term contracts providing coverage in excess of a $3.750 billion retention.

$3.250 billion in excess of a $500 million retention contracts

  • Reinsure personal lines property and automobile losses arising out of multiple perils including hurricane, windstorm, hail, tornado, earthquake, fires following earthquakes and wildfires in all states, excluding personal lines property in the state of Florida
  • Include coverage for commercial lines property and automobile (physical damage only) in all states, excluding commercial lines property in the state of Florida
  • In addition to Allstate and its affiliated companies covered under the 2020-2021 Program, coverage also includes the National General Stock Companies as named ceding companies
  • Consists of multi-year contracts, each providing one-third of 95% of the total limit
    • Existing contracts effective June 1, 2019 consist of five layers and expires May 31, 2022
    • Existing contracts effective June 1, 2020 consist of three layers and expires May 31, 2023
    • New contracts effective June 1, 2021 consist of four layers
      • Three layers expiring May 31, 2024
      • One layer consisting of multi-year contracts expiring May 31, 2022, May 31, 2023 and May 31, 2024
  • Includes one reinstatement of limits per year, with premium required
  • Reinsurance premiums are subject to redetermination for exposure changes on an annual basis

$ in millions

Per

occurrence

Risk period

% of limit

Retention

limit

effective date

placed (2)

States Covered

Reinstatement

$500

$500

June 1, 2021

95

1,000

750

June 1, 2021

95

Countrywide, excluding

1 per occurrence limit

personal and commercial

each contract year (per

1,750

1,000

June 1, 2021

95

lines property in Florida

layer), premium due

2,250

1,000

April 1, 2021

95

____________________________

  1. Limits for the $3.250 billion xs $500 million contracts are 31.66% placed, 31.67% placed, and 31.67% placed for the respective terms of June 1, 2021 to May 31, 2022, June 1, 2022 to May 31, 2023, and June 1, 2023 to May 31, 2024.

3

Eight-Year Term Contracts

  • Contain comparable contract terms and conditions as the $3.250 billion in excess of a $500 million retention contracts
  • Provide a $210 million limit in excess of a minimum $3.750 billion retention and a $138 million limit in excess of a minimum $4.467 billion retention, are 95% placed and expire May 31, 2029
  • Contain a variable reset option, which the ceding entities may elect to invoke at each anniversary, and which allows for the annual adjustment of each contract's attachment and exhaustion levels within specified limits Contain one reinstatement of limits over its eight-year term with premium required. Reinsurance premiums are subject to redetermination for exposure changes on an annual basis

$ in millions

Per occurrence

Risk period

% of

Per

reinsurance

effective

Contract

limit

occurrence

contract

date

expiration date

placed

Retention

limit

States Covered

Reinstatement

8-Year Term

April 1, 2021

March 31, 2029

95

$3,750

$210

Countrywide,

1 per occurrence

Contract 1

excluding FL

limit over each

personal and

contract's 8-year

8-Year Term

April 1, 2021

March 31, 2029

95

4,467

138

commercial lines

term, premium

Contract 2

property

due

Sanders Re Catastrophe Bonds - Per Occurrence Excess Agreements

At the annual reset of the Sanders Re Catastrophe Bonds, the National General Stock Companies were added as ceding companies.

The two Sanders Re Per Occurrence Excess Catastrophe Reinsurance Contracts

  • Reinsure personal lines property and automobile excess catastrophe losses in 49 states and the District of Columbia, excluding the state of Florida
  • Reinsure business located in the covered territory and arising out of covered events
  • Contain a variable reset option, which the ceding entities may invoke for risk periods subsequent to the first risk period and which allows for the annual adjustment of the contract's attachment and exhaustion levels within specified limits
  • Contracts do not include a reinstatement of limits
  • Inuring contracts include: New Jersey Excess Catastrophe Agreement, 8-Year Term Contract 1, 2019-1 Excess Catastrophe Reinsurance Contract and the 5% co-participation

2020-1 Class A Excess Catastrophe Reinsurance Contract

  • Placed with Sanders Re II Ltd. which obtained funding from the ILS market to collateralize the contract's limit
  • Risk period began April 1, 2020 and terminates on March 31, 2024
  • Reinsures excess catastrophe losses caused by named storms, earthquakes and fire following earthquakes, severe weather, wildfires, and other naturally occurring or man-made events declared to be a catastrophe by Allstate
  • Provides a $150 million limit in excess of a minimum $3.750 billion retention
  • While inuring layers are fully intact, the contract would begin to pay subject losses in excess of $4.467 billion

4

2017-1 Excess Catastrophe Reinsurance Contract

  • Placed with Sanders Re Ltd., which obtained funding from the ILS market to collateralize the contract's limit
  • Risk period began March 31, 2017 and terminates on November 30, 2021
  • Reinsures excess catastrophe losses caused by named storms, earthquakes and fire following earthquakes, severe thunderstorms, winter storms, wildfire, volcanic eruptions, and meteorite impacts
  • Provides a $375 million limit in excess of a minimum $3.750 billion retention
  • Amounts payable for automobile losses are based on insured industry losses as reported by Property Claim Services (PCS) and further adjusted to account for our automobile exposures in reinsured areas
  • Inuring contracts include all preceding plus the 2020-1 Class A Excess Catastrophe Reinsurance Contract and 8-Year Term Contract 2; while inuring layers are fully intact, the contract would begin to pay subject losses in excess of $4.763 billion

Sanders Re Catastrophe Bonds - Per Occurrence Excess & Aggregate Agreements

At the annual reset of the Sanders Re Catastrophe Bonds, the National General Stock Companies were added as ceding companies.

The three Sanders Re Per Occurrence & Aggregate Excess Catastrophe Reinsurance Contracts

  • Reinsure personal lines property and automobile excess catastrophe losses in 49 states and the District of Columbia, excluding the state of Florida
  • Reinsure business located in the covered territory and arising out of covered events
  • Reinsures excess catastrophe losses caused by named storms, earthquakes and fire following earthquakes, severe weather, wildfires, and other naturally occurring or man-made events declared to be a catastrophe by Allstate
  • For each annual period beginning April 1, Allstate declared catastrophes occurring during such annual period can be aggregated to erode the aggregate retention and qualify for coverage under the aggregate limit
  • Reinsurance recoveries from the Nationwide Per Occurrence Excess Contracts and the New Jersey Excess Catastrophe Agreement inure to the benefit of the annual aggregate layer
  • Reinsurance recoveries collected under the per occurrence limit of each contract are not eligible for cession under the annual aggregate limit of that contract
  • Reinsurance recoveries for all loss occurrences and annual aggregate losses qualifying for coverage during each contract's four-year risk period are limited to our ultimate net loss from covered events and subject to the contract's limit
  • Contain a variable reset option, which the ceding entities may invoke for risk periods subsequent to the first risk period and which allows for the annual adjustment of the contract's attachment and exhaustion levels within specified limits
  • Contracts do not include a reinstatement of limits

2019-1 Excess Catastrophe Reinsurance Contract

  • Placed with Sanders Re II Ltd. which obtained funding from the ILS market to collateralize the contract's limit
  • Risk period began April 1, 2019 and terminates on March 31, 2023
  • Originally provided one limit of $400 million, 75% placed, during its four-year term which can be used on a per occurrence or an annual aggregate basis. For a qualifying loss occurrence, the contract provides 75% of $400 million in reinsurance limits in excess of a minimum $3.750 billion retention for the April 1, 2021 to March 31, 2022 period
  • $195 million of $300 million placed limit was eroded in Q1 2021; $105m remains
  • Inuring contracts include: New Jersey Excess Catastrophe Agreement, 8-Year Term Contract 1, and the 5% co-participation; while inuring layers are fully intact, the contract would begin to pay subject losses in excess of $3.960 billion
  • $105 million of aggregate reinsurance limit remains, attaching at an annual retention of $3.800 billion and exhausting at $4.200 billion

5

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The Allstate Corporation published this content on 05 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 May 2021 20:50:01 UTC.