Allstate expects to recover $1.4 billion of California wildfire losses from reinsurers

By David Bull

Feb 20 - (The Insurer) - Allstate has announced estimated January catastrophe losses of $1.08 billion, or $849 million after tax, including $1.07 billion related to the California wildfires across three events, net of estimated reinsurance recoveries of $1.40 billion.

In a statement on Thursday morning, the Northbrook, Illinois-based insurer said its California wildfire event estimate includes reinstatement premiums and an estimated Fair Plan assessment.

The carrier had initially reported a $2.0 billion gross loss from the wildfires earlier this month, including loss adjustments, claims expenses and an estimated Fair Plan assessment.

At the time it said that a gross loss at that level would put its reinsurers on the hook for $900 million of losses.

Allstate’s reinsurance program provides coverage up to $7.9 billion for a single event net of reinstatement provision.

On an investor call on February 6, Mario Rizzo, president of property liability, said: “The financial impact of the wildfires reflect the comprehensive risk and return approach we've taken to managing the homeowners insurance business.

"Allstate made the decision to reduce California exposure beginning in 2007. Our homeowners market share has been reduced by over 50% since that time."

He added that each additional $100 million in gross losses above the initial $2.0 billion estimate would result in $10 million of net losses, with the insurer’s catastrophe excess of loss cover attaching at $1.0 billion.

As previously reported, last year Allstate renewed its nationwide excess cat program with an additional $1 billion of limit at the top of the multi-year structure, which has retentions of $500 million to $1.0 billion, with the higher retention applying to second and third events.

The structure includes traditional reinsurance limit as well as layers protected by its series of Sanders Re cat bonds.