Allstate has announced details of its new reinsurance program to provide $2 billion in coverage for various lines against named storms, earthquakes and other catastrophes.

Allstate Corporation chairman Edward Liddy said the measures were aimed at improving returns for risks in catastrophe-prone areas.

The Northbrook, Ill.-based auto and home insurer said the new nationwide reinsurance agreements will provide $2 billion in coverage in excess of $2 billion of retained losses from named storms, earthquakes and fires following earthquakes.

Allstate has currently placed $750 million of a limit of $2 billion in excess of $2 billion of aggregate losses during a one-year contract term. The company will market the rest of the limit this month.

The move comes following the company's third-quarter losses of more than $3 billion from Hurricanes Katrina and Rita.

Since that time, the company has undertaken a major public relations effort to get the states and federal government to provide a backstop for mega-catastrophe loss. Such a program is being considered by the National Association of Insurance Commissioners, but with an all-perils policy, including flood risk, that Allstate does not support.

Bear Stearns analyst David Small estimates the new program will increase costs $250 million this year and $400 million in the following years.

Mr. Small said discussions with insurance commissioners have indicated that in many states Allstate will be able to pass on the added costs to consumers so the actual decrease on earnings per share will be much less than the 13 cents to 21 cents the cost estimates would entail.

Allstate president Thomas Wilson said, however, that the company will seek to include reinsurance costs in the current premium rate through new efficiencies of operation and cost structure.

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Allstate Details New Re Program

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