Allstate 2012 Annual Report Download - page 139

2012. Allstate Protection’s separate reinsurance programs in Pennsylvania and Kentucky will continue to address
exposures unique to those states. A description of the catastrophe reinsurance treaties that will reinsure Allstate
Protection as of June 1, 2012 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 Seven 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 comprises three contracts, each contract providing one third of
95% of the total limit and expiring as of May 31, 2013, May 31, 2014 and May 31, 2015. Coverage for the Sixth
Layer will comprise five contracts and will be 82.34% placed. For June 1, 2012 to May 31, 2013, two existing
contracts, expiring May 31, 2013 and May 31, 2014, provide 31.67% of the placed limit; and three newly placed
contracts, expiring May 31, 2013, May 31, 2014, and May 31, 2015, in total provide 50.67% of the placed limit.
The newly placed contracts, effective June 1, 2012, will not have a prepaid reinstatement limit thus requiring
premium for the reinstatement of limits. The Sixth Layer does not have a reinstatement of limits. 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 under a three year term contract expiring May 31, 2014.
The reinsurance limit may be used for Coverage A, Coverage B or a combination of both and is not subject to
reinstatement. For June 1, 2012 to May 31, 2013, Coverage A of the Top and Drop provides 12.66% of
$500 million in limits in excess of a $3.25 billion retention, which completes the 95% placement of the Sixth
Layer of the Per Occurrence Excess Catastrophe Reinsurance agreement. Coverage B provides 25% 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. For
June 1, 2013 to May 31, 2014, the contract 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. One existing and a newly placed contract each provides 32% of
$400 million of limits excess of a $150 million retention and include one reinstatement per contract year. In
addition, a separate existing New Jersey contract will remain in place until May 31, 2013 and 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 be effective June 1, 2012 for three years and provide 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.
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