Reinsurance

The effects of reinsurance on property-liability insurance premiums written and earned and life and annuity premiums and contract charges for the years ended December 31 are as follows:



($ in millions)	2015			2014			2013
Property-liability insurance premiums written
Direct	$	31,924		$	30,686		$	29,241
Assumed	39			48			52
Ceded	(1,092		)	(1,120		)	(1,129		)
Property-liability insurance premiums written, net of reinsurance	$	30,871		$	29,614		$	28,164
Property-liability insurance premiums earned
Direct	$	31,274		$	29,914		$	28,638
Assumed	41			45			49
Ceded	(1,006		)	(1,030		)	(1,069		)
Property-liability insurance premiums earned, net of reinsurance	$	30,309		$	28,929		$	27,618
Life and annuity premiums and contract charges
Direct	$	1,641		$	1,944		$	2,909
Assumed	849			629			82
Ceded	(332		)	(416		)	(639		)
Life and annuity premiums and contract charges, net of reinsurance	$	2,158		$	2,157		$	2,352

Property-Liability

The Company purchases reinsurance after evaluating the financial condition of the reinsurer, as well as the terms and price of coverage. Developments in the insurance and reinsurance industries have fostered a movement to segregate asbestos, environmental and other discontinued lines exposures into separate legal entities with dedicated capital. Regulatory bodies in certain cases have supported these actions. The Company is unable to determine the impact, if any, that these developments will have on the collectability of reinsurance recoverables in the future.

Property-Liability reinsurance recoverable

Total amounts recoverable from reinsurers as of December 31, 2015 and 2014 were $5.98 billion and $5.78 billion, respectively, including $86 million and $89 million, respectively, related to property-liability losses paid by the Company and billed to reinsurers, and $5.89 billion and $5.69 billion, respectively, estimated by the Company with respect to ceded unpaid losses (including IBNR), which are not billable until the losses are paid.

With the exception of the recoverable balances from the Michigan Catastrophic Claims Association (“MCCA”), Lloyd’s of London, New Jersey Property-Liability Insurance Guaranty Association (“PLIGA”) and other industry pools and facilities, the largest reinsurance recoverable balance the Company had outstanding was $62 million and $65 million from Westport Insurance Corporation as of December 31, 2015 and 2014, respectively. No other amount due or estimated to be due from any single property-liability reinsurer was in excess of $32 million and $34 million as of December 31, 2015 and 2014, respectively.

The allowance for uncollectible reinsurance was $80 million and $95 million as of December 31, 2015 and 2014, respectively, and is primarily related to the Company’s Discontinued Lines and Coverages segment.

Industry pools and facilities

Reinsurance recoverable on paid and unpaid claims including IBNR as of December 31, 2015 and 2014 includes $4.66 billion and $4.42 billion, respectively, from the MCCA. The MCCA is a mandatory insurance coverage and reinsurance indemnification mechanism for personal injury protection losses that provides indemnification for losses over a retention level that increases every other MCCA fiscal year. The retention level is $545 thousand per claim for the fiscal two-years ending June 30, 2017 compared to $530 thousand per claim for the fiscal two-years ending June 30, 2015. The MCCA is obligated to fund the ultimate liability for participating member companies qualifying claims and claims expenses. The MCCA operates similar to a reinsurance program and is funded by participating member companies through a per vehicle annual assessment. The MCCA has been legally authorized to assess participating member companies pursuant to enabling legislation that provides for annual determination and assessment. This assessment is included in the premiums charged to the Company’s customers and when collected, the Company remits the assessment to the MCCA. These assessments provide funds for the indemnification for losses described above. The MCCA is required to assess an amount each year sufficient to cover lifetime claims of all persons catastrophically injured in that year, its operating expenses, and adjustments for the amount of excesses or deficiencies in prior assessments. The MCCA prepares statutory-basis financial statements in conformity with accounting practices prescribed or permitted by the State of Michigan Department of Insurance and Financial Services (“MI DOI”). The MI DOI has granted the MCCA a statutory permitted practice that expires in June of 2016 to discount its liabilities for loss and loss adjustment expense. As of June 30, 2015, the date of its most recent annual financial report, the permitted practice reduced the MCCA’s accumulated deficit by $50.64 billion to $691 million.

Allstate sells and administers policies as a participant in the National Flood Insurance Program (“NFIP”). The amounts recoverable as of December 31, 2015 and 2014 were $27 million and $7 million, respectively. Ceded premiums earned include $293 million, $312 million and $316 million in 2015, 2014 and 2013, respectively. Ceded losses incurred include $120 million, $38 million and $289 million in 2015, 2014 and 2013, respectively. Under the arrangement, the Federal Government pays all covered claims and certain qualifying claim expenses.

The PLIGA, as the statutory administrator of the Unsatisfied Claim and Judgment Fund (“UCJF”), provides compensation to qualified claimants for personal injury protection, bodily injury, or death caused by private passenger automobiles operated by uninsured or “hit and run” drivers. The UCJF also provides private passenger stranger pedestrian personal injury protection benefits when no other coverage is available. The fund provides reimbursement to insurers for the medical benefits portion of personal injury protection coverage paid in excess of $75,000 with no limits for policies issued or renewed prior to January 1, 1991 and in excess of $75,000 and capped at $250,000 for policies issued or renewed from January 1, 1991 to December 31, 2004. The amounts recoverable as of December 31, 2015 and 2014 were $500 million and $508 million, respectively.

Ceded premiums earned under the Florida Hurricane Catastrophe Fund (“FHCF”) agreement were $13 million, $11 million and $16 million in 2015, 2014 and 2013, respectively. There were no ceded losses incurred in 2015, 2014 or 2013. The Company has access to reimbursement provided by the FHCF for 90% of qualifying personal property losses that exceed its current retention of $63 million for the 2 largest hurricanes and $21 million for other hurricanes, up to a maximum total of $199 million effective from June 1, 2015 to May 31, 2016. There were no amounts recoverable from the FHCF as of December 31, 2015 or 2014.

Catastrophe reinsurance

The Company has the following catastrophe reinsurance agreements in effect as of December 31, 2015:

The Nationwide Per Occurrence Excess Catastrophe Reinsurance program (the “Nationwide program”) provides $4.42 billion of reinsurance coverage subject to a $500 million retention and subject to the amount of reinsurance placed in each of its ten layers. The Nationwide program comprises four agreements: The Per Occurrence Excess Catastrophe Reinsurance agreement, the 2013-1 Property Claim Services (“PCS”) Excess Catastrophe Reinsurance agreement, the 2014-1 PCS Excess Catastrophe Reinsurance agreement, and the Buffer Layer Excess Catastrophe Reinsurance agreement.

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The Per Occurrence Excess Catastrophe Reinsurance agreement reinsures personal lines property and automobile excess catastrophe losses caused by multiple perils in all states except Florida and New Jersey and comprises layers one through six and a portion of layer nine of the program. Coverage for each of the first through fifth layers comprises three contracts, with each contract providing one-third of 95% of the total layer limit and expiring May 31, 2016, May 31, 2017 and May 31, 2018. The sixth layer is 95% placed and comprises one contract expiring May 31, 2022. The contracts for layers one through six cover $3.07 billion in per occurrence losses subject to a $500 million retention. Coverage for a portion of layer nine is through one contract expiring May 31, 2022 that provides 29% of $446 million or $131 million in limits excess of a $3.62 billion attachment level. All contracts include one reinstatement of limits with premium required.

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The 2013-1 PCS Excess Catastrophe Reinsurance agreement reinsures personal lines property and automobile excess catastrophe losses caused by hurricanes in 28 states and the District of Columbia, and earthquakes, including fires following earthquakes, in California, New York and Washington and comprises portions of layers seven and nine of the program. The agreement comprises two contracts that expire May 3, 2017: a Class B Excess Catastrophe Reinsurance contract provides 34% of $440 million or $150 million in limits excess of a $3.07 billion attachment level of the seventh layer, and a Class A Excess Catastrophe Reinsurance contract provides 45% of $446 million or $200 million in limits excess of a $3.62 billion attachment level of the ninth layer. The contracts do not include a reinstatement of limits.

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The 2014-1 PCS Excess Catastrophe Reinsurance agreement reinsures personal lines property and automobile excess catastrophe losses caused by hurricanes in 29 states and the District of Columbia, and earthquakes, including fires following earthquakes, in California, New York and Washington and comprises portions of layers seven and nine and layer ten of the program. The agreement comprises three contracts: a Class D Excess Catastrophe Reinsurance contract provides 61% of $500 million or $305 million in limits excess of a $3.07 billion attachment level of the seventh layer, a Class C Excess Catastrophe Reinsurance contract provides 26% of $446 million or $115 million in limits excess of a $3.62 billion attachment level of the ninth layer, and a Class B Excess Catastrophe Reinsurance contract provides 95% of $347 million or $330 million in limits excess of a $4.07 billion attachment level of the tenth layer. The Class D contract expires May 22, 2019 and the Class C and Class B contracts expire May 22, 2018. The contracts do not include a reinstatement of limits.

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The Buffer Layer Excess Catastrophe Reinsurance agreement reinsures personal lines property and automobile excess catastrophe losses caused by multiple perils in all states except Florida and New Jersey and comprises a portion of layer seven and layer eight of the program. The agreement comprises two contracts that expire May 31, 2017: one contract provides 34% of $60 million or $20 million in limits excess of a $3.51 billion retention and one contract provides 95% of $50 million excess of a $3.57 billion retention. The contracts do not include a restatement of limits.

Losses recoverable under the Company’s New Jersey, Kentucky, California and Pennsylvania reinsurance agreements, described below, are disregarded when determining coverage under the contracts included in the Nationwide program.

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The New Jersey Excess Catastrophe Reinsurance agreement comprises three contracts. The contracts expire May 31, 2016, May 31, 2017 and May 31, 2018, and provide 32%, 32% and 32%, respectively, of $400 million of limits excess of a provisional $165 million retention, a $157 million retention, and a $150 million retention, 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.

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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.

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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.

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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.

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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.

Allstate Financial

The Company’s Allstate Financial segment reinsures certain of its risks to other insurers primarily under yearly renewable term, coinsurance, modified coinsurance and coinsurance with funds withheld agreements. These agreements result in a passing of the agreed-upon percentage of risk to the reinsurer in exchange for negotiated reinsurance premium payments. Modified coinsurance and coinsurance with funds withheld are similar to coinsurance, except that the cash and investments that support the liability for contract benefits are not transferred to the assuming company and settlements are made on a net basis between the companies.

For certain term life insurance policies issued prior to October 2009, Allstate Financial ceded up to 90% of the mortality risk depending on the year of policy issuance under coinsurance agreements to a pool of fourteen unaffiliated reinsurers. Effective October 2009, mortality risk on term business is ceded under yearly renewable term agreements under which Allstate Financial cedes mortality in excess of its retention, which is consistent with how Allstate Financial generally reinsures its permanent life insurance business. The following table summarizes those retention limits by period of policy issuance.



Period		Retention limits
April 2015 through current		Single life: $2 million per life Joint life: no longer offered
April 2011 through March 2015		Single life: $5 million per life, $3 million age 70 and over, and $10 million for contracts that meet specific criteria Joint life: $8 million per life, and $10 million for contracts that meet specific criteria
July 2007 through March 2011		$5 million per life, $3 million age 70 and over, and $10 million for contracts that meet specific criteria
September 1998 through June 2007		$2 million per life, in 2006 the limit was increased to $5 million for instances when specific criteria were met
August 1998 and prior		Up to $1 million per life

In addition, Allstate Financial has used reinsurance to effect the disposition of certain blocks of business. Allstate Financial had reinsurance recoverables of $1.44 billion and $1.46 billion as of December 31, 2015 and 2014, respectively, due from Prudential related to the disposal of substantially all of its variable annuity business that was effected through reinsurance agreements. In 2015, life and annuity premiums and contract charges of $94 million, contract benefits of $40 million, interest credited to contractholder funds of $21 million, and operating costs and expenses of $18 million were ceded to Prudential. In 2014, life and annuity premiums and contract charges of $109 million, contract benefits of $36 million, interest credited to contractholder funds of $21 million, and operating costs and expenses of $20 million were ceded to Prudential. In 2013, life and annuity premiums and contract charges of $120 million, contract benefits of $139 million, interest credited to contractholder funds of $22 million, and operating costs and expenses of $23 million were ceded to Prudential. In addition, as of December 31, 2015 and 2014, Allstate Financial had reinsurance recoverables of $148 million and $118 million, respectively, due from subsidiaries of Citigroup (Triton Insurance and American Health and Life Insurance) and Scottish Re (U.S.) Inc. in connection with the disposition of substantially all of the direct response distribution business in 2003.

Allstate Financial is the assuming reinsurer for LBL’s life insurance business sold through the Allstate agency channel and LBL’s payout annuity business in force prior to the sale of LBL on April 1, 2014. Under the terms of the reinsurance agreement, the Company is required to have a trust with assets greater than or equal to the statutory reserves ceded by LBL to the Company, measured on a monthly basis. As of December 31, 2015, the trust held $5.32 billion of investments, which are reported in the Consolidated Statement of Financial Position.

As of December 31, 2015, the gross life insurance in force was $437.13 billion of which $93.33 billion was ceded to the unaffiliated reinsurers.

Allstate Financial’s reinsurance recoverables on paid and unpaid benefits as of December 31 are summarized in the following table.



($ in millions)	2015		2014
Annuities	$	1,457	$	1,594
Life insurance	897		916
Other	185		197
Total Allstate Financial	$	2,539	$	2,707

As of December 31, 2015 and 2014, approximately 92% and 94%, respectively, of Allstate Financial’s reinsurance recoverables are due from companies rated A- or better by S&P.