Allstate 2008 Annual Report Download - page 285

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Industry pools and facilities
Reinsurance recoverable on paid and unpaid claims including IBNR at December 31, 2008 and 2007 includes
$1.11 billion and $1.02 billion, respectively, from the MCCA. The MCCA is a mandatory reinsurance mechanism for
personal injury protection losses over a retention level that increases each MCCA fiscal year. The retention levels
are $420 thousand per claim and $440 thousand per claim for the fiscal years ending June 30, 2008 and 2009,
respectively. The MCCA is funded by assessments from member companies who, in turn, can recover
assessments from policyholders.
Ceded premiums earned under the Florida Hurricane Catastrophe Fund (‘‘FHCF’’) agreement were $26 million,
$45 million and $49 million in 2008, 2007 and 2006, respectively. Ceded losses incurred include $28 million,
$22 million and $146 million in 2008, 2007 and 2006, respectively. The Company has access to reimbursement
provided by the FHCF for 90% of qualifying personal property losses that exceed its current retention of
$80 million for the two largest hurricanes and $27 million for other hurricanes, up to a maximum total of
$398 million effective from June 1, 2008 to May 31, 2009. Reinsurance recoverables include $36 million and
$47 million recoverable from the FHCF for qualifying property losses at December 31, 2008 and 2007, respectively.
Allstate sells and administers policies as a participant in the National Flood Insurance Program (‘‘NFIP’’). The
total amounts recoverable at December 31, 2008 and 2007 were $138 million and $22 million, respectively. Ceded
premiums earned include $257 million, $257 million and $232 million in 2008, 2007 and 2006, respectively. Ceded
losses incurred include $344 million, $65 million and $32 million in 2008, 2007 and 2006, respectively. Under the
arrangement, the Federal Government is obligated to pay all claims.
Catastrophe reinsurance
The Company has the following catastrophe reinsurance treaties in effect:
●an aggregate excess agreement covered by three contracts with different effective dates for Allstate
Protection personal lines auto and property business countrywide, except for Florida. The first contract
which is 47.5% placed, covers storms named or numbered by the National Weather Service, earthquakes,
and fires following earthquakes, and is effective June 1, 2007 to May 31, 2009. The remaining two
contracts are 47.5% placed and cover storms named or numbered by the National Weather Service, fires
following earthquakes, and California wildfires, and are effective June 1, 2008 to May 31, 2010;
●a California fires following earthquakes agreement that covers Allstate Protection personal property excess
catastrophe losses in California, effective June 1, 2008 to May 31, 2011;
●multi-year reinsurance treaties that cover Allstate-brand personal property excess catastrophe losses in
Connecticut, Rhode Island, New Jersey, New York, and Texas effective June 1, 2008 to May 31, 2011;
●a South-East agreement that covers Allstate Protection personal property excess catastrophe losses for
storms named or numbered by the National Weather Service in 10 Atlantic and Gulf states and the District
of Columbia effective June 1, 2008 to May 31, 2009;
●a Texas agreement for additional hurricane coverage for Allstate Protection personal property excess
catastrophe losses in the state effective June 18, 2008 to June 17, 2011;
●a Kentucky agreement that provides coverage for Allstate Protection personal property excess catastrophe
losses in the state for earthquakes and fires following earthquakes effective June 1, 2008 to May 31, 2009;
●a North-East agreement for additional hurricane coverage in the states of New York, New Jersey and
Connecticut for Allstate Protection personal property and auto excess catastrophe losses effective June 15,
2007 to June 8, 2010; and
●Four separate agreements for Allstate Floridian Insurance Company and its subsidiaries (‘‘Allstate
Floridian’’), for personal property excess catastrophe losses in Florida that coordinate coverage with our
participation in the FHCF, effective June 1, 2008 to May 31, 2009.
Under all reinsurance agreements, the Company ceded premiums earned of $679 million and $811 million in
the years ended December 31, 2008 and 2007, respectively.
Florida
During 2006, Allstate Floridian Insurance Company (‘‘AFIC’’) and Allstate Floridian Indemnity (‘‘AFI’’) entered
into a 100% quota share reinsurance agreement with Royal Palm Insurance Company (‘‘Royal Palm’’) on selected
personal property policies written in Florida. AFIC and AFI no longer offers coverage on these policies after their
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Notes