Allstate’s aggregate cat bonds look safer as end of risk period end nears, Feb cat loss low

Allstate reported a relatively low level of catastrophe losses for February, meaning qualifying losses under its aggregate Sanders Re catastrophe bonds remain a reasonable distance from attachment ponts, we are told, so with the annual risk period nearing its end these notes are now being viewed as safer, according to sources.

US insurer Allstate has only reported $92 million of pre-tax catastrophe losses from the month of February 2025.

That came on the heels of the significant $1.08 billion pre-tax catastrophe loss estimate for January, following the devastating wildfires in California.

After February, that means Allstate’s total catastrophe losses year-to-date in 2025 had reached $1.17 billion, or $922 million after-tax.

With its aggregate catastrophe bonds already having seen their attachment deductibles partially eroded throughout the annual risk period, which runs from April 1st, the Los Angeles wildfires had been seen as an event that could tip the outstanding cat bond tranches that provide aggregate reinsurance to Allstate closer to attaching.

As a result, the prices had been marked down significantly in some cases, on cat bond broker pricing sheets.

The wildfires had driven a significant gross loss impact for Allstate, given the disclosure of more a $1.4 billion reinsurance recovery being expected for the event, leaving the $1.08 billion net.

As we said at the time, the wildfire losses were “likely to drive a significant erosion of the attachment deductible for these cat bonds, effectively making them riskier over the rest of their annual aggregate term to the end of March.”

Three tranches of outstanding Sanders Re aggregate catastrophe bond notes sponsored by Allstate were among those that saw the more meaningful declines in secondary market pricing after the wildfires.

Allstate’s pre-tax catastrophe losses had reached approximately $5.4 billion since April 1st 2024 by the end of February 2025, so the applicable pre-tax figure that maps to the risk period for its outstanding Sanders Re aggregate catastrophe bond notes.

However, as we’ve explained in the past, given the $50 million per-event deductible that needs to be surpassed for catastrophe losses to qualify under the terms of the catastrophe bonds, as well as the fact the cat bonds provide specific coverage for parts of Allstate’s book, it seems (from previous quarters) that only somewhere between 50% and 70% of the pre-tax catastrophe loss figure seems to qualify to erode the aggregate attachment deductibles.

In fact, we know that the cat bond applicable aggregate catastrophe loss figure had reached $1.7 billion by the end of July 2024, compared to the pre-tax loss figure of $2.64 billion at that time.

With the Allstate aggregate cat bonds, the riskiest sit at an attachment of $3.6 billion for the current risk period that runs to the end of March 2025 and at this stage we’re told the aggregate applicable loss remains a reasonable distance from the trigger point, although we do not have a specific figure for that at this time.

Given February’s low level of catastrophe losses, we’re told confidence that the Allstate aggregate cat bonds will get through the rest of the risk period without attaching their coverage has risen.

Sources also told us that two of the riskiest aggregate tranches of Allstate’s Sanders Re catastrophe bonds have seen their secondary market prices marked-up considerably on one of the ILS market’s pricing sheets.

We’re told this is likely in response to the insurer reporting a much less impactful month in catastrophe loss terms for February, and the fact that the annual risk period end date for the notes is nearing.

It’s important to note that there could be additional qualifying catastrophe losses for the full-month of March 2025 that erode the aggregate retention deductible for the Sanders Re catastrophe bond tranches as well, not least because of the recent severe convective weather outbreak that we reported on last week.

However, our sources say they do not believe this event alone could raise the qualifying cat loss figure by anywhere near enough for the cat bonds to attach. Meaning that there would need to be additional impactful catastrophe losses over the next week that raise Allstate’s aggregate loss tally meaningfully, if any of its aggregate cat bonds are to face a loss due to the current and now nearly over risk period.

Other aggregate cat bonds that have been marked down, some heavily, since the wildfires tend to have their annual risk period end closer to the mid-year, so those arrangements have longer to run through the peak of the US severe convective storm season, and looking at pricing for them some are certainly not considered safe from potentially attaching yet.