US insurer Allstate expects its losses from the recent Los Angeles, California wildfires will be around $1.1 billion, pre-tax and net of reinsurance, which has implications for the erosion of aggregate Sanders Re catastrophe bond deductibles and may result in recoveries under its Nationwide excess-of-loss reinsurance tower.In reporting its fourth-quarter 2024 results, Allstate’s CEO highlighted the first-quarter 2025 wildfire loss event.“We rapidly supported customers impacted by the January California wildfires and related losses are expected to be about $1.1 billion, pre-tax, net of reinsurance,” Tom Wilson, Chair, President and CEO of The Allstate Corporation explained.Wilson added that the loss reflects Allstate’s decision to reduce its market share in California, which the company has been doing since 2007.

While the CEO also highlighted that the $1.1 billion loss expectation also reflects its “comprehensive reinsurance program.” As we reported a few days ago, .While even the lowest-down of those in-force aggregate Sanders Re cat bond tranches only attach at $3.56 billion of qualifying losses to the insurer, with the risk periods running until the end of March 2025, this wildfire loss event is certain to eat up a relatively meaningful amount of the buffer deductibles sitting beneath the attachment point.Two of the tranches by around 50% at the mid of bid and offer last Friday, while another higher attaching tranche ($4.06bn) declined by around 10%, as investors digested the potential for the wildfires to elevate the risk of the cat bonds attaching over the remainder of their risk periods.

On the traditional reinsurance side, the lower multi-year layers of are structured to protect the insurer up to a $4.25 billion event, with the first $250 million in excess of $500 million retained by the company.So with a $1.1 billion net of reinsurance loss expected, it appears the wildfires may result in recoveries from those multi-year agreements.Although it is important to note that how the wildfires are accounted for, in terms of a single event or two (for the Palisades and Eaton fires) will depend on how much reinsurance support Allstate benefits from.

For the full-year 2024, Allstate reported $4.964 billion of catastrophe losses across the period.As ever it it challenging to know how much of these, since the April 1st annual aggregate risk period began, will have qualified under the terms of its Sanders Re catastrophe bonds.As we reported in November, after October Allstate’s pre-tax catastrophe losses had reached $4.84 billion in 2024, while from April 1st the total had then reached $4.086 billion.

But, , which shows that a smaller proportion tend to be applicable to the deductible erosion.But the wildfires fall into the same annual risk period for the aggregate cat bonds, so they will have taken a further meaningful chunk out of the buffers sitting beneath their attachment points, hence the mark downs in price recently seen..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

Our can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.