Allstate 2011 Annual Report Download - page 133

unique to those states. A description of the catastrophe reinsurance treaties that will reinsure Allstate Protection as of
June 1, 2011 follows:
Nationwide excluding Florida and New Jersey
• The Per Occurrence Excess Catastrophe Reinsurance agreement reinsures personal lines property and auto
excess catastrophe losses caused by multiple perils under Six Layers of coverage as follows:
First Layer $250 million limit in excess of a $500 million retention and after an initial $250 million
in losses ‘‘otherwise recoverable’’ has been satisfied, 1 reinstatement
Second Layer $250 million limit in excess of a $750 million retention, 1 reinstatement
Third Layer $500 million limit in excess of a $1 billion retention, 1 reinstatement
Fourth Layer $750 million limit in excess of a $1.5 billion retention, 1 reinstatement
Fifth Layer $1 billion limit in excess of a $2.25 billion retention, 1 reinstatement
Sixth Layer $500 million limit in excess of a $3.25 billion retention
Coverage for the First through the Fifth Layers are 95% placed. Each Layer comprises three contracts, each
contract providing one third of the total limit and expiring as of May 31, 2012, 2013 and 2014, respectively.
Coverage for the 6th Layer is 47.5% placed and, unlike the other layers, does not have a reinstatement limit.
Reinsurance premium is subject to redetermination for exposure changes at each anniversary.
• The Top and Drop Excess Catastrophe Reinsurance agreement reinsures personal lines property and auto
excess catastrophe losses caused by multiple perils. The reinsurance limit may be used for Coverage A,
Coverage B or a combination of both and is not subject to reinstatement. Coverage A of the Top and Drop
provides 47.5% of $500 million in limits in excess of a $3.25 billion retention. Coverage B provides 95% of
$250 million in limits in excess of a $750 million retention. In addition to this retention, the Company must incur
$500 million in losses, ‘‘otherwise recoverable’’, under Coverage B during the contract year before Coverage B
attaches. Losses from multiple qualifying occurrences can apply to this $500 million threshold. Coverage B
essentially is a third limit for the Second Layer of the Per Occurrence Excess Catastrophe Reinsurance
agreement described above. For June 1, 2011 to May 31, 2012, the placement of the Top and Drop Excess
Catastrophe Reinsurance agreement consists of an annual contract and a three year term contract which in the
aggregate provide 47.5% of the $500 million Coverage A limit and 95% of the $250 million Coverage B limit. For
June 1, 2012 to May 31, 2013, the three year term contract provides 12.66% of Coverage A’s and 25% of
Coverage B’s placement and for June 1, 2013 to May 31, 2014, it provides 6% of Coverage A’s and 12.66% of
Coverage B’s placement. Reinsurance premium is subject to redetermination for exposure changes.
New Jersey
• The Excess Catastrophe Reinsurance contract reinsures personal lines property excess catastrophe losses in
New Jersey caused by multiple perils. The newly placed contract is effective June 1, 2011 to May 31, 2014 and
provides 32% of $400 million of limits excess of a $150 million retention and includes one reinstatement per
contract year. In addition, the existing New Jersey agreement consisting of two contracts each providing two
Layers of coverage will remain in place. The agreement expiring May 31, 2012 provides a First Layer of 31% of
$300 million of limits in excess of a $200 million retention, and a Second Layer of 26% of $200 million of limits in
excess of a $500 million retention. The agreement expiring May 31, 2013 provides a First Layer of 32% of
$300 million of limits in excess of a $184 million retention and a Second Layer of 42% of $200 million in limits
excess of a $484 million retention. Each Layer includes one reinstatement per contract year. The reinsurance
premium and retention are subject to redetermination for exposure changes at each anniversary.
Pennsylvania
• The Excess Catastrophe Reinsurance Contract reinsures personal lines property losses in Pennsylvania caused
by multiple perils. This agreement will remain in effect until May 31, 2012 and provides 95% of $100 million of
limits in excess of a $100 million retention with two limits being available for the remaining term of the contract.
The reinsurance premium and retention are not subject to redetermination for exposure changes.
Kentucky
• The Earthquake Excess Catastrophe Reinsurance Contract reinsures personal lines property losses in
Kentucky caused by earthquakes or fires following earthquakes. The agreement is effective June 1, 2011 for
three years and provides 95% of $25 million of limits in excess of a $5 million retention. The agreement provides
three limits over its three year term subject to two limits being available in any one contract year. The
reinsurance premium and retention are not subject to redetermination for exposure changes.
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