Allstate reports $641m of August cat losses, around half from Maui wildfire

US primary insurer Allstate has reported yet another costly month of catastrophe losses for August 2023, reporting some $641 million of cat losses for events that occurred in the month, with around half coming from the Maui wildfire.

Allstate announced estimated catastrophe losses for the month of August today, saying they amount to $551 million pre-tax, or $435 million after-tax.

But the actual August monthly catastrophe loss burden was higher, at an estimated $641 million from 18 separate loss events.

This total was partially offset by favorable reserve reestimates for prior events, which reduces the reportable estimate for the month.

The devastating wildfires in Maui appear to have driven more than $300 million in losses for Allstate, as the carrier said approximately half of the catastrophe losses experienced in the month of August related to the Maui wildfire.

It takes Allstate’s total catastrophe losses for July and August to $864 million, pre-tax.

But, Allstate’s catastrophe losses for the current annual aggregate risk period related to its catastrophe bonds continues to rise, as a result of the August events.

After July, as we reported, Allstate’s pre-tax total for catastrophe losses across the first four months of the annual aggregate year for its catastrophe bonds had already risen to around $3.05 billion.

Adding in the losses suffered in August, would take this total to around $3.69 billion.

Recall that, Allstate has annual aggregate catastrophe bonds in-force that would attach at $3.4 billion of qualifying losses, with the annual risk period for those cat bonds beginning on April 1st, 2023.

But it’s difficult to know just how the aggregated and qualifying catastrophe loss total sits at any point in time, given the lower down Sanders cat bonds, that attach at $3.4 billion, feature a $50 million event deductible.

However, the Maui wildfire will almost certainly be one event that qualified in August, so it is safe to assume there has been a reasonable uplift in the erosion to the aggregate deductible sitting beneath those cat bonds, in the last month.

That may have been sufficient to elevate the catastrophe bond market’s view of how risky those bonds are getting, as the losses accumulate beneath their attachment, which has affected their secondary market prices in recent months.

It was always anticipated that Allstate’s cat bonds could come under some more pressure with its losses from the Maui wildfire, so it will be interesting to see if their pricing changes again on secondary market sheets over the coming weeks.

It’s worth also remembering that Allstate is currently looking for possible solutions that can help it absorb volatility better, including considering buying more reinsurance, likely in aggregate stop-loss form.

On the inwards side of its business, Allstate continues to raise pricing for customers, as Jess Merten, Chief Financial Officer of The Allstate Corporation explained, “Allstate continued to implement significant auto and homeowners insurance rate actions as part of our comprehensive plan to improve profitability. Since the beginning of the year, rate increases for Allstate brand auto insurance have resulted in a premium impact of 8.6%, which are expected to raise annualized written premiums by approximately $2.23 billion. Implemented rate increases and inflation in insured home replacement costs resulted in a 13.2% increase in homeowners insurance average gross written premium in August 2023 compared to the prior year.”