Allstate 2015 Annual Report Download - page 234

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respectively. The contracts reinsure personal lines property and automobile excess catastrophe losses in New
Jersey. All contracts contain one reinstatement of limits each year. The reinsurance premium and retention
applicable to the agreement are subject to redetermination for exposure changes annually.
• The Kentucky Earthquake Excess Catastrophe Reinsurance agreement provides coverage for Allstate Protection
personal lines property excess catastrophe losses in the state for earthquakes and fires following earthquakes
effective June1, 2014 to May31, 2017. The agreement provides three limits of $25 million excess of a $5 million
retention subject to two limits being available in any one contract year and is 95% placed.
• The E&S Earthquake agreement comprises one three year term contract which reinsures personal lines property
catastrophe losses in California caused by the peril of earthquake and insured by our excess and surplus lines
insurer. The contract expires June 30, 2018. Unlike the contracts comprising the Nationwide Program, the E&S
Earthquake agreement provides reinsurance on a 100% quota share basis with no retention. The contract allows
for cession of policies providing earthquake coverage so long as the total amount of in-force building limits
provided by those policies does not exceed $400 million. This cap limits the policies that are covered by the
reinsurance and not the amount of loss eligible for cession which includes losses to dwellings, other structures,
personal property, and additional living expenses on policies covered by this program. The agreement reinsures
only shake damage resulting from earthquake peril.
• The Pennsylvania Excess Catastrophe Reinsurance agreement comprises a three-year term contract that provides
coverage for Allstate Protection personal lines property excess catastrophe losses in the state for multi-perils
effective June1, 2015 through May31, 2018. The agreement provides three limits of $100 million excess of a $100
million retention subject to two limits being available in any one contract year and is 95% placed. The reinsurance
premium and retention are not subject to redetermination for exposure changes.
• The Florida Excess Catastrophe Reinsurance agreement comprises six contracts and includes our subsidiaries
Castle Key Insurance Company (“CKIC”) and Castle Key Indemnity Company’s (“CKI”, and together with CKIC,
“Castle Key”) participation in the mandatory Florida Hurricane Catastrophe Fund (“FHCF”). The agreement
reinsures Castle Key for personal lines property excess catastrophe losses in Florida. All contracts constituting
the agreement, except one, the Sanders Re 2014-2 Class A contract, provide a one year term effective June1,
2015 through May31, 2016 with reinsurance premium subject to redetermination for exposure changes. The
Sanders Re 2014-2 contract is a three-year term contract with a risk period effective June 1, 2014 through
May31, 2017. With the exception of the mandatory FHCF contracts and the Sanders Re 2014-2 contract, all
contracts provide reinsurance for qualifying losses to personal lines property arising out of multiple perils in
addition to hurricanes. The mandatory FHCF contracts reinsure qualifying personal lines property losses caused
by storms the National Hurricane Center declares to be hurricanes, and the Sanders Re 2014-2 contract reinsures
qualifying losses to personal lines property caused by a named storm event, a severe thunderstorm event, or an
earthquake event. These events are defined in the Sanders Re 2014-2 contract as events declared by various
reporting agencies, including PCS, and in the case of a severe thunderstorm event, should PCS cease to report
on severe thunderstorms, then such event will be deemed a severe thunderstorm if Castle Key has assigned a
catastrophe code to such severe thunderstorm. The mandatory FHCF contracts include an estimated maximum
provisional limit of 90% of $181 million or $163 million, in excess of a provisional retention of $66 million, and also
include reimbursement of up to 5% eligible loss adjustment expenses. The limit and retention of the mandatory
FHCF contracts were subject to re-measurement based on June 30, 2015 exposure data. In addition, the FHCF’s
retention is subject to adjustment upward or downward to an actual retention based on submitted exposures to
the FHCF by all participants. For each of the two largest hurricanes, the provisional retention is $66 million and
a retention equal to one-third of that amount, or approximately $22 million, is applicable to all other hurricanes
for the season beginning June 1, 2015. All contracts comprising the Florida Excess Catastrophe Reinsurance
agreement, including the mandatory FHCF contracts, provide an estimated provisional limit of $707 million
excess of a provisional $15 million retention.
The Company ceded premiums earned of $414 million, $437 million and $471 million under catastrophe reinsurance
agreements in 2015, 2014 and 2013, respectively.
Asbestos, environmental and other
Reinsurance recoverables include $183 million and $202 million from Lloyd’s of London as of December31, 2015 and
2014, respectively. Lloyd’s of London, through the creation of Equitas Limited, implemented a restructuring to solidify
its capital base and to segregate claims for years prior to 1993. In 2007, Berkshire Hathaway’s subsidiary, National
Indemnity Company, assumed responsibility for the Equitas claim liabilities through a loss portfolio transfer reinsurance
agreement and continues to runoff the Equitas claims.