Allstate 2014 Annual Report Download - page 154

Property-Liability reinsurance ceded For Allstate Protection, we utilize reinsurance to reduce exposure to
catastrophe risk and manage capital, and to support the required statutory surplus and the insurance financial strength
ratings of certain subsidiaries such as Castle Key Insurance Company and Allstate New Jersey Insurance Company. We
purchase significant reinsurance to manage our aggregate countrywide exposure to an acceptable level. The price and
terms of reinsurance and the credit quality of the reinsurer are considered in the purchase process, along with whether
the price can be appropriately reflected in the costs that are considered in setting future rates charged to policyholders.
We also participate in various reinsurance mechanisms, including industry pools and facilities, which are backed by the
financial resources of the property-liability insurance company market participants, and have historically purchased
reinsurance to mitigate long-tail liability lines, including environmental, asbestos and other discontinued lines
exposures. We retain primary liability as a direct insurer for all risks ceded to reinsurers. The Michigan Catastrophic
Claim Association provides indemnification for losses over a retention level and under the National Flood Insurance
Program the Federal Government pays all covered claims.
Our reinsurance recoverable balances are shown in the following table as of December 31, net of the allowance we
have established for uncollectible amounts.
($ in millions) Standard &
Poor’s
financial Reinsurance
strength recoverable on paid
rating (1) and unpaid claims, net
2014 2013
Industry pools and facilities
Michigan Catastrophic Claim Association (‘‘MCCA’’) N/A $ 4,419 (2) $ 3,462 (2)
New Jersey Unsatisfied Claim and Judgment Fund
(‘‘NJUCJF’’) N/A 508 378
North Carolina Reinsurance Facility N/A 60 58
National Flood Insurance Program N/A 7 32
Other 22
Subtotal 4,996 3,932
Lloyd’s of London (‘‘Lloyd’s’’) A+ 202 191
Westport Insurance Corporation (formerly Employers
Reinsurance Corporation) AA- 65 85
New England Reinsurance Corporation N/A 33 33
R&Q Reinsurance Company N/A 28 29
Clearwater Insurance Company N/A 27 28
One Beacon Insurance Company N/A 23 24
Swiss Reinsurance America Corporation AA- 23 29
Other, including allowance for future uncollectible
reinsurance recoverables 386 398
Subtotal 787 817
Total Property-Liability $ 5,783 $ 4,749
(1) N/A reflects no rating available.
(2) As of December 31, 2014 and 2013, MCCA includes $32 million and $29 million of reinsurance recoverable on paid claims, respectively, and
$4.39 billion and $3.43 billion of reinsurance recoverable on unpaid claims, respectively.
Reinsurance recoverables include an estimate of the amount of property-liability insurance claims and claims
expense reserves that are ceded under the terms of the reinsurance agreements, including incurred but not reported
unpaid losses. We calculate our ceded reinsurance estimate based on the terms of each applicable reinsurance
agreement, including an estimate of how IBNR losses will ultimately be ceded under the agreement. We also consider
other limitations and coverage exclusions under our reinsurance agreements. Accordingly, our estimate of reinsurance
recoverables is subject to similar risks and uncertainties as our estimate of reserves for property-liability claims and
claims expense. We believe the recoverables are appropriately established; however, as our underlying reserves
continue to develop, the amount ultimately recoverable may vary from amounts currently recorded. We regularly
evaluate the reinsurers and the respective amounts recoverable, and a provision for uncollectible reinsurance is recorded
54