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Allstate halves top layers after placing $750mn Sanders Re cat bond

Allstate halved the top traditional layers of its nationwide catastrophe reinsurance programme for 2014 after placing the $750mn Sanders Re cat bond this year, according to recent disclosures from the insurer.

Previously, Allstate's traditional programme topped out with two layers of $500mn xs $2.75bn and $500mn xs $3.25bn. Both were only partially placed and provided a total of $507mn of limit.

This year, Allstate dropped these layers and substituted them with a $204mn xs $2.75bn layer. It also placed a new "buffer layer" providing an additional $63mn xs $3.436mn of one-shot cover over a three-year period, at a level that can be adjusted annually to fit around its index-linked cat bond protection.

Both the new layers were 95 percent placed, in line with Allstate's co-participation throughout the programme, providing a total of $254mn of limit.

Allstate already had two existing multi-year cat bond layers at the top of its 2013 programme, but its $750mn Sanders Re 2014 issuance added three new tranches of peak cover. One tranche sits in between the two top traditional layers and the other two tranches are at the very top of the programme.

The Sanders Re bond reinsurance triggers based on industry loss levels, using an index weighted to suit Allstate's portfolio. Investors in the notes received an insurance-linked coupon of between 3 and 3.9 percent.

The core per-occurrence catastrophe programme excluded Florida and New Jersey from the covered US states. In line with previous years, each layer is placed in three tranches with rolling maturities over a three-year period.

Allstate also placed a new cat bond for its Florida subsidiary Castle Key this year, which may have replaced the former one-shot "sliver" layer on its Floridian reinsurance programme.

This reinsured the company's 10 percent co-participation alongside the Florida Hurricane Catastrophe Fund layer of $254mn xs $97mn and was the only single-shot layer on the Floridian programme.

The Florida Sanders Re deal triggers on losses above $41mn, or $30mn depending on which Castle Key subsidiary reports the claims, but other reinsurance inures to the benefit of the cat bond. It paid an insurance-linked premium of 3.9 percent.

Allstate also cut a one-shot top and drop layer from its programme this year, which had previously provided up to $31.65mn of limit.

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