Allstate buys $325m homeowners aggregate reinsurance, renews taller Florida tower

US primary insurer Allstate has purchased a new aggregate reinsurance cover for its US homeowners business at the mid-year renewals, adding what is a new protection feature for the company that covers events greater than $1 million and will provide $325 million of placed aggregate limit, across a $500 million layer excess of a $3.5 billion retention.

In addition, Allstate has renewed its Florida reinsurance tower that covers its business there, including its Castle Key subsidiaries, with this tower rebuilding again as it now tops out at a higher $1.1 billion of losses.

Allstate’s main Nationwide occurrence and aggregate towers remain as they were after its April renewal, when it had already announced new occurrence treaties that incepted at June 1st this year.

While the main Nationwide aggregate tower continues to be supported solely by some of the insurer’s Sanders Re catastrophe bonds, that feature a $50 million event deductible and have been partially eroded by losses in the last annual risk period to March 31st 2025.

On the new additional of a US homeowners specific aggregate reinsurance arrangement, which is the most notable change in Allstate’s latest reinsurance disclosure, the frequency of catastrophe and weather losses are clearly on Allstate’s mind.

While, the terms surrounding this new aggregate contract clearly reflect a growing appetite for aggregate risks in the reinsurance market as well.

Allstate’s new US Homeowners aggregate reinsurance arrangement will run for a seven month duration, from June 1st 2025 through December 31st.

The new US wide aggregate treaty provides Allstate with $325 million of placed limit in excess of a $3.5 billion retention, coveraing US Homeowners catastrophe events including for the state of Florida.

It’s worth noting that the aggregate cat bonds, with their $50 million per-event deductible, have not covered Florida before, so this new contract is further reaching in protection terms.

But perhaps more notable is the fact the new US homeowners aggregate reinsurance arrangement covers Allstate homeowners catastrophe losses for events greater than just $1 million, while there is a per event limit of $1 billion, net of reinsurance loss recoveries.

That $1 million event qualifier is particularly low for any aggregate reinsurance arrangement, meaning Allstate will see a significant number of weather and catastrophe losses qualify and begin eroding the retention layer.

The aggregate homeowners contract is 65% placed, meaning the $325 million of placed reinsurance limit spans a layer from $3.5 billion of aggregate qualifying losses up to exhaustion at $4 billion for the company.

Given the very low event deductible and the fact this aggregate reinsurance also covers Florida, it would be very interesting to know what Allstate paid for this new cover. But unfortunately that information is not made available.

This new aggregate layer of coverage appears to offer significant utility to Allstate, as the company has regularly reported over $3.5 billion in reported pre-tax catastrophe losses in a single year. It only covers a seven month term, but with that running through the wind season and also covering losses in Florida, it could be a meaningful buffer for Allstate’s earnings if weather and catastrophe activity is severe enough to attach the protection.

On the main Florida per-occurrence catastrophe reinsurance tower, a year ago, at the mid-year reinsurance renewals, Allstate shrank its Florida excess-of-loss reinsurance tower again.

Allstate had lowered the top of its Florida reinsurance tower to $1.285 billion at June 2023, then lowered it further to just $890 million at the mid-year 2024 renewals.

At the same time, catastrophe bonds have become an increasing feature of the Florida reinsurance arrangements Allstate has in place, filling out more of the upper-layers of the tower.

In 2025, Allstate has now lifted the top of its Florida reinsurance tower to $1.1 billion again (as seen in the diagram), helped in part by the $150 million of multi-peril and fully-collateralized reinsurance protection from its latest catastrophe bond, the Sanders Re II Ltd. (Series 2025-2) issuance.

Catastrophe bonds now fill out 50% of the tower between $404 million and $704 million of losses and then 100% of the tower from that level up to $1 billion, providing a meaningful source of protection for its upper-to-mid layers.

The Florida reinsurance tower still has a $30 million retention, while FHCF coverage also features and inures to the main tower again, but this year only $170 million of FHCF limits are evident, compared to $205.6 million in last year’s smaller tower, suggesting more reliance on private reinsurance capital for its Florida protection in 2025.

Allstate’s extension of its Florida tower again suggests also that the insurer is increasingly confident on that state’s insurance market, perhaps reflecting an appetite to grow its business in the state again.

During an earnings call yesterday, Jess Merten, Chief Financial Officer of Allstate spoke about the new aggregate reinsurance layer and the firm’s approach to utilising reinsurance capital.

Merten explained, “The reinsurance programme and what we ended up placing is always rooted in our economic capital framework and risk and return decision-making that allows us to mitigate risk on both a per-event and aggregate basis.

“Our total catastrophe reinsurance limit that we purchased this year across all programmes was just over $11 billion that’s up $2 billion from last year, and we saw about a 10% risk adjusted decrease in the cost.

“So that’s a very good outcome. We got more coverage for less on a risk-adjusted basis, and we had really good support from both the reinsurance and catastrophe bond markets and that demonstrates really the strength of our programme.

“Our renewal placement process began just after the LA wildfires, literally while they were being extinguished, and we still had strong support from, again, both traditional reinsurers and the cat bond partners that we work with to place the programme.

“So we renewed during the most recent period. We did renew the Florida programme, and we did add some aggregate limit on US homeowners, we added $325 million of limit on an aggregate basis.

“So if you think of the overall programme, we now have $825 million of cat agg limit that’s placed, about $58 million, to be clear, has already been utilised for expected recoveries. Now that leaves us with $767 million remaining aggregate limit on top of our very robust per-occurrence.

“So that’s a high level summary of what we did, the changes that we made, and really, just going back to all of these placements are done through a risk and return lens that we understand, how we effectively using this alternative capital source to lower our capital requirements.”

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