Reinsurance and Indemnification

12 Months Ended

Dec. 31, 2023


Note 11			Reinsurance and Indemnification


Effects of reinsurance and indemnification on property and casualty premiums written and earned and accident and health insurance premiums and contract charges
	For the years ended December 31,
($ in millions)	2023		2022		2021
Property and casualty insurance premiums written
Direct	$	54,632	$	50,065	$	45,523
Assumed	396		245		213
Ceded	(2,018)		(1,824)		(1,736)
Property and casualty insurance premiums written, net of recoverables	$	53,010	$	48,486	$	44,000

Property and casualty insurance premiums earned
Direct	$	52,301	$	47,552	$	43,944
Assumed	358		221		178
Ceded	(1,989)		(1,869)		(1,904)
Property and casualty insurance premiums earned, net of recoverables	$	50,670	$	45,904	$	42,218

Accident and health insurance premiums and contract charges
Direct	$	1,865	$	1,838	$	1,892
Assumed	28		31		21
Ceded	(47)		(37)		(79)
Accident and health insurance premiums and contract charges, net of recoverables	$	1,846	$	1,832	$	1,834


Effects of reinsurance ceded and indemnification programs on property and casualty insurance claims and claims expense and accident, health and other policy benefits
($ in millions)	For the years ended December 31,
	2023		2022		2021
Property and casualty insurance claims and claims expense (1)	$	(633)	$	(1,600)	$	(3,484)
Accident, health and other policy benefits	(44)		15		(91)

(1)Includes approximately $39 million of ceded losses related to the Nationwide Reinsurance Program for 2023.


Reinsurance and indemnification recoverables, net
	As of December 31,
($ in millions)	2023		2022
Property and casualty
Paid and due from reinsurers and indemnitors	$	254	$	291
Unpaid losses estimated (including IBNR)	8,396		9,176
Total property and casualty	$	8,650	$	9,467
Accident and health insurance	159		152
Total	$	8,809	$	9,619


Rollforward of credit loss allowance for reinsurance recoverables
	For the years ended December 31,
($ in millions)	2023		2022
Property and casualty (1) (2)
Beginning balance	$	(62)	$	(66)
Increase in the provision for credit losses	(1)		(5)
Write-offs	1		9
Ending balance	$	(62)	$	(62)

Accident and health insurance
Beginning balance	$	(3)	$	(8)

Decrease/(Increase) in the provision for credit losses	—		5
Write-offs	—		—
Ending Balance	$	(3)	$	(3)

(1)Primarily related to Run-off Property-Liability reinsurance ceded.

(2)Indemnification recoverables are considered collectible based on the industry pool and facility enabling legislation.

Property and casualty reinsurance and indemnifications recoverables

Property and casualty programs are grouped by the following characteristics:

1.Indemnification programs - industry pools, facilities or associations that are governed by state insurance statutes or regulations or the federal government.

2.Catastrophe reinsurance programs - reinsurance protection for catastrophe exposure nationwide and by specific states, as applicable.

3.Other reinsurance programs - reinsurance protection for asbestos, environmental and other liability exposures as well as commercial lines, including shared economy.

Property and casualty reinsurance is in place for the Allstate Protection, Run-off lines and Protection Services segments. The Company purchases reinsurance after evaluating the financial condition of the reinsurer as well as the terms and price of coverage.

Indemnification programs The Company participates in state-based industry pools or facilities mandating participation by insurers offering certain coverage in their state, including the Michigan Catastrophic Claims Association (“MCCA”), the New Jersey Property-Liability Insurance Guaranty Association (“PLIGA”), the North Carolina Reinsurance Facility (“NCRF”) and the Florida Hurricane Catastrophe Fund (“FHCF”). When the Company pays qualifying claims under the coverage indemnified by a state’s pool or facility, the Company is reimbursed for the qualifying claim losses and expenses. Each state pool or facility may assess participating companies to collect sufficient amounts to meet its total indemnification requirements. The enabling legislation for each state’s pool or facility compels the pool or facility only to indemnify participating companies for qualifying claim losses and expenses; the state pool or facility does not underwrite the coverage or take on the ultimate risk of the indemnified business. As a pass through, these pools or facilities manage the receipt of assessments paid by participating companies and payment of indemnified amounts for covered claims presented by participating companies. The Company has not had any credit losses related to these indemnification programs.

State-based industry pools or facilities

Michigan Catastrophic Claims Association The MCCA is a statutory indemnification mechanism for member insurers’ qualifying personal injury protection claims paid for the unlimited lifetime medical benefits above the applicable retention level for qualifying injuries from automobile, motorcycle and commercial vehicle accidents. Indemnification recoverables on paid and unpaid claims, including IBNR, as of December 31, 2023 and 2022 include $6.42 billion and $6.72 billion, respectively, from the MCCA for its indemnification obligation.

The MCCA is funded by annually assessing participating member companies actively writing motor vehicle coverage in Michigan on a per vehicle basis that is currently $122 per vehicle insured for unlimited personal injury protection (“PIP”) coverage and $48 per vehicle for other PIP coverage. The MCCA’s calculation of the annual assessment is based upon the total of members’ actuarially determined present value of expected payments on lifetime claims by all persons expected to be catastrophically injured in that year and ultimately qualify for MCCA reimbursement, its operating expenses, and adjustments for the amount of excesses or deficiencies in prior assessments. The assessment is incurred by the Company as policies are written and recovered as a component of premiums from the Company’s customers.

The MCCA indemnifies qualifying claims of all current and former member companies (whether or not actively writing motor vehicle coverage in Michigan) for qualifying claims and claims expenses incurred while the member companies were actively writing the mandatory PIP coverage in Michigan. Member companies actively writing automobile coverage in Michigan include the MCCA annual assessments in determining the level of premiums to charge insureds in the state.

As required for member companies by the MCCA, the Company reports covered paid and unpaid claims to the MCCA when estimates of loss for a reported claim are expected to exceed the retention level, the claims involve certain types of severe injuries, or there are litigation demands received suggesting the claim value exceeds certain thresholds. The retention level is adjusted upward every other MCCA fiscal year by the lesser of 6% or the increase in the consumer price index. The retention level is $635 thousand per claim for the fiscal two-years ending June 30, 2025 compared to $600 thousand per claim for the fiscal two-years ending June 30, 2023.

The MCCA is obligated to fund the ultimate liability of member companies’ qualifying claims and claim expenses. The MCCA does not underwrite the insurance coverage or hold any underwriting risk.

The MCCA indemnifies members as qualifying claims are paid and billed by members to the MCCA. Unlimited lifetime covered losses result in significant levels of ultimate incurred claim reserves being recorded by member companies along with offsetting indemnification recoverables. Disputes with claimants over coverage on certain reported claims can result in additional losses, which may be recoverable from the MCCA, excluding litigation expenses. There is currently no method by which insurers are able to obtain the benefit of managed care programs to reduce claims costs through the MCCA.

The MCCA annual assessments fund current operations and member company reimbursements. 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 30, 2025 to discount its liabilities for loss and loss adjustment expense. As of June 30, 2023, the date of its most recent annual financial report, the MCCA had cash and invested assets of $21.58 billion and an accumulated deficit of $2.05 billion. The permitted practice reduced the accumulated deficit by $44.95 billion. As a result of this deficit, the assessment includes an increase of $48 per passenger and commercial vehicle and motorcycle insured beginning July 1, 2023, with varying assessments for commercial fleet and historical vehicles.

New Jersey Property-Liability Insurance Guaranty Association PLIGA serves as the statutory administrator of the Unsatisfied Claim and Judgment Fund (“UCJF”), Workers’ Compensation Security Fund and the New Jersey Surplus Lines Insurance Guaranty Fund.

In addition to its insolvency protection responsibilities, PLIGA reimburses insurers for unlimited excess medical benefits (“EMBs”) paid in connection with PIP claims in excess of $75,000 for policies issued or renewed prior to January 1, 1991, and limited EMB claims in excess of $75,000 and capped at $250,000 for policies issued or renewed on or after January 1, 1991, to December 31, 2003.

A significant portion of the incurred claim reserves and the recoverables can be attributed to a small number of catastrophic claims. Assessments paid to PLIGA for the EMB program totaled $7 million in 2023. The amounts of paid and unpaid recoverables as of December 31, 2023 and 2022 were $326 million and $330 million, respectively.

PLIGA annually assesses all admitted property and casualty insurers writing covered lines in New Jersey for PLIGA indemnification and expenses. PLIGA assessments may be recouped as a surcharge on premiums collected. PLIGA does not ultimately retain underwriting risk as it assesses member companies for their expected qualifying losses to provide funding for payment of its indemnification obligation to member companies for their actual losses. As a pass through, PLIGA facilitates these transactions of receipt of assessments paid by member companies and payment to member companies for covered claims presented by them for indemnification. As of December 31, 2022, the date of its most recent annual financial report, PLIGA had a fund balance of $271 million.

As statutory administrator of the UCJF, PLIGA 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 pedestrian personal injury protection benefits when no other coverage is available.

PLIGA annually collects a UCJF assessment from all admitted property and casualty insurers writing motor vehicle liability insurance in New Jersey for UCJF indemnification and expenses. UCJF assessments can

be expensed as losses recoverable in rates as appropriate. As of December 31, 2022, the date of its most recent annual financial report, the UCJF fund had a balance of $71 million.

North Carolina Reinsurance Facility The NCRF provides automobile liability insurance to drivers that private market insurers are not otherwise willing to insure. All insurers licensed to write automobile insurance in North Carolina are members of the NCRF. Premiums, losses and expenses are assigned to the NCRF. North Carolina law allows the NCRF to recoup operating losses for certain insureds through a surcharge to policyholders. As of September 30, 2023, the NCRF reported a deficit of $122 million in members’ equity. The NCRF implemented a loss recoupment surcharge on all private passenger and commercial fleet policies effective October 1, 2023, through March 31, 2024. Member companies are assessed the recoupment surcharge. The loss recoupment surcharge will be adjusted on April 1, 2024 and discontinued once losses are recovered. The NCRF results are shared by the member companies in proportion to their respective North Carolina automobile liability writings. For the fiscal year ending September 30, 2023, net gain was $25 million, including $1.2 billion of earned premiums, $364 million of certain private passenger auto risk recoupment and $153 million of member loss recoupments. As of December 31, 2023, the NCRF recoverables on paid claims is $83 million and recoverables on unpaid claims is $299 million. Paid recoverable balances, if covered, are typically settled within sixty days of monthly filing.

Florida Hurricane Catastrophe Fund Allstate subsidiaries Castle Key Insurance Company (“CKIC”) and Castle Key Indemnity Company (“CKI”, and together with CKIC, “Castle Key”) participate in the mandatory coverage provided by the FHCF and therefore have access to reimbursement for certain qualifying Florida hurricane losses from the FHCF. Castle Key has exposure to assessments and pays annual premiums to the FHCF for this reimbursement protection. The FHCF has the authority to issue bonds to pay its obligations to participating insurers in excess of its capital balances. Payment of these bonds is funded by emergency assessments on all property and casualty premiums in the state, except workers’ compensation, medical malpractice, accident and health insurance and policies written under the National Flood Insurance Program (“NFIP”). The FHCF emergency assessments are limited to 6% of premiums per year beginning the first year in which reimbursements require bonding, and up to a total of 10% of premiums per year for assessments in the second and subsequent years, if required to fund additional bonding. The FHCF has not issued an emergency assessment since 2015.

Annual premiums earned and paid under the FHCF agreement were $28 million, $24 million and $15 million in 2023, 2022 and 2021, respectively. Commuted contracts related to Hurricane Irma resulted in payments to the Company of $6 million in 2023. Qualifying losses were $74 million and $13 million in 2022 and 2021, respectively. The Company has access

to reimbursement provided by the FHCF for 90% of qualifying personal property losses that exceed its current retention of $152 million for the two largest hurricanes and $51 million for other hurricanes, up to a maximum total of $312 million, effective from June 1, 2023 to May 31, 2024. The amounts recoverable from the FHCF totaled $82 million and $96 million as of December 31, 2023 and 2022, respectively.

Federal Government - National Flood Insurance Program NFIP is a program administered by the Federal Emergency Management Agency (“FEMA”) whereby the Company sells and services NFIP flood insurance policies as an agent of FEMA and receives fees for its services. The Company is fully indemnified for claims and claim expenses and does not retain any ultimate risk for the indemnified business. The federal government is obligated to pay all claims and certain allocated loss adjustment expenses in accordance with the arrangement.

Congressional authorization for the NFIP is periodically evaluated and may be subjected to freezes, including when the federal government experiences a shutdown. FEMA has a NFIP reinsurance program to manage the future exposure of the NFIP through the transfer of risk to private reinsurance companies and capital market investors. Congress is evaluating the funding of the program as well as considering reforms to the program that would be incorporated in legislation to reauthorize the NFIP. As of September 30, 2023, the NFIP owes $20.5 billion to the U.S. Treasury.

The amounts recoverable as of December 31, 2023 and 2022 were $76 million and $145 million, respectively. Premiums earned under the NFIP include $327 million, $319 million and $350 million in 2023, 2022 and 2021, respectively. Qualifying losses incurred include $102 million, $435 million and $267 million in 2023, 2022 and 2021, respectively.

Catastrophe reinsurance The Company’s reinsurance program is designed to provide reinsurance protection for catastrophes resulting from multiple perils including hurricanes, windstorms, hail, tornadoes, winter storms, wildfires, earthquakes and fires following earthquakes.

•The Company purchases reinsurance from traditional reinsurance companies as well as the insurance-linked securities (“ILS”) market.

•The majority of the Company’s program comprises multi-year contracts, primarily placed in the traditional reinsurance market, such that generally one-third of the program is renewed every year.

•Coverage is generally purchased on a broad geographic, product line and multiple peril loss basis.

•Florida personal lines property is covered by a separate agreement, as the risk of loss is different and the Company’s subsidiaries operating in this state are separately capitalized.

•When applicable, reinsurance reinstatement premiums are recognized in the same period as

the loss event that gave rise to the reinstatement premium and are recorded in claims and claims expense in the consolidated statements of operations.

The Company’s current catastrophe reinsurance program supports the Company’s risk and return framework which is intended to provide shareholders with an acceptable return on the risks assumed in the property business, and to reduce variability of earnings, while providing protection to customers. This framework incorporates the Company’s robust economic capital model and is informed by catastrophe risk models including hurricanes, earthquakes and wildfires and adjusts based on premium and insured value growth. The Company’s reinsurance agreements are part of its capital models and its catastrophe risk management strategy. As of December 31, 2023, the modeled 1-in-100 probable maximum loss for hurricane, earthquake and wildfire perils is approximately $2.5 billion, net of reinsurance. The Company continually reviews its aggregate risk appetite and the cost and availability of reinsurance to optimize the risk and return profile of this exposure. The following catastrophe reinsurance agreements are in effect as of December 31, 2023.

The Nationwide Excess Catastrophe Reinsurance Program (the “Nationwide Program”) provides coverage up to $6.92 billion of loss less retention of $500 million to $750 million, and is subject to the percentage of reinsurance placed in each of its agreements. Property business in the state of Florida is excluded from this program. Separate reinsurance agreements address the distinct needs of separately capitalized legal entities. The Nationwide Program includes reinsurance agreements with both the traditional and ILS markets as described below:

•Core traditional market multi-year and per occurrence excess agreements provide limits totaling $4.69 billion for catastrophe losses arising out of multiple perils and are comprised of the following:

–$3.58 billion of placed limits exhausting at $4.25 billion, with one annual reinstatement:

▪31.6% of the coverage is provided in four multi-year contracts attaching at $500 million.

▪31.7% of the coverage is provided in five multi-year contracts with the first $250 million in excess of $500 million retained by Allstate.

▪31.7% of the coverage is provided in one single-year contract providing $250 million of placed limit in excess of a $750 million retention and four multi-year contracts attaching at $1.00 billion.

▪Three single-year contracts providing coverage between $1.75 billion and $4.25 billion, 4% placed.

–Two single-year contracts providing $500 million of limits in excess of a $4.25 billion retention, one 95% placed and one 4% placed.

–$105 million of placed limits in excess of a $4.75 billion retention and $131 million of placed limits in excess of a $5.54 billion retention, both with a 5% co-participation and one reinstatement of limits over its eight-year term.

–$375 million of placed limits in single-year placements filling capacity around the multi-year and ILS placements:

▪One contract providing $95 million of placed limits in excess of a $4.75 billion retention, with two limits available in any one contract year.

▪One contract providing $260 million of placed limits in excess of a $4.75 billion retention, with no annual reinstatement.

▪One contract providing $20 million of placed limits in excess of a $6.82 billion retention, with no annual reinstatement.

•ILS placements provide $1.80 billion of placed limits, with no reinstatement of limits, and are comprised of the following:

–Six contracts providing occurrence coverage of $1.05 billion of placed limits, reinsuring losses in all states except Florida caused by named storms, earthquakes and fire following earthquakes, severe weather, wildfires, and other naturally occurring or man-made events determined to be a catastrophe by the Company.

–Three contracts providing occurrence and aggregate coverage of $425 million of placed limits, also provide that for each annual period beginning April 1, Allstate declared catastrophes to personal lines property and automobile business can be aggregated to erode the aggregate retention and qualify for coverage under the aggregate limits. Recoveries are limited to the ultimate net loss from the reinsured event.

–Two contracts, providing aggregate coverage of $325 million of placed limits.

Florida program The Florida program provides coverage for property policies of CKIC and certain affiliate companies for Florida catastrophe events up to $1.66 billion of a billion of losses less a $40 million retention. The Florida program includes reinsurance agreements placed in the traditional market, the FHCF, the Florida Reinsurance to Assist Policyholders Program (“RAP”) and the ILS market as follows:

• Traditional market placements comprise reinsurance limits for losses to personal lines property in Florida arising out of multiple perils. These contracts provide a combined $695 million of limits, with a portion of the traditional market

placements providing coverage for perils not covered by the FHCF and RAP contracts, which only cover hurricanes.

• Three FHCF contracts provide $330 million of limits for qualifying losses to personal lines property in Florida caused by storms the National Hurricane Center declares to be hurricanes. The three contracts are 90% placed.

•Three RAP contracts provide $49 million of limits for qualifying losses to personal lines property in Florida caused by storms the National Hurricane Center declares to be hurricanes. The three contracts are 90% placed.

• ILS placements provide $620 million of reinsurance limits for qualifying losses to personal lines property in Florida caused by a named storm event, a severe weather event, an earthquake event, a fire event, a volcanic eruption event, or a meteorite impact event.

National General Lender Services Standalone Program is placed in the traditional market and provides $255 million of coverage, subject to a $60 million retention, with one reinstatement of limits. Inuring contracts include the National General Florida Hurricane Catastrophe Fund contract providing $64 million of limits in excess of a $33 million retention, 90% placed, and the National General RAP Contract providing $10 million of limits in excess of a $24 million retention, 90% placed.

National General Reciprocal Excess Catastrophe Reinsurance Contracts are placed in the traditional market and provide $600 million of coverage, subject to a $20 million retention, with one reinstatement of limits.

Kentucky Earthquake Excess Catastrophe Reinsurance Contract is placed in the traditional market and provides two limits of $28 million, subject to a $2 million retention with one reinstatement of limits.

Canada Catastrophe Excess of Loss Reinsurance Contract is placed in the traditional market and provides CAD 255 million of placed limits, subject to a CAD 75 million retention, with one reinstatement of limits.

The Company has not experienced credit losses on its catastrophe reinsurance programs. The total cost of the property catastrophe reinsurance program was $1.02 billion, $788 million and $556 million in 2023, 2022 and 2021, respectively.

Other reinsurance programs The Company’s other reinsurance programs relate to commercial lines, including shared economy, and asbestos, environmental, and other liability exposures. The largest reinsurance recoverable balance the Company had outstanding was $180 million from Lloyd’s of London as of December 31, 2023 and 2022. These programs also include reinsurance recoverables of $113 million and $183 million from Aleka Insurance Inc. as of December 31, 2023 and 2022, respectively.