Typhoon Roke thought not strong enough to trigger catastrophe bonds

by Artemis on September 23, 2011

Typhoon Roke, the 15th named storm of the northwest Pacific typhoon season, made landfall on Honshu island, Japan on the 21st September. A major storm with winds of 180kmh, typhoon Roke was a category 2 typhoon. Roke travelled across as much as 350km of Japan, impacting Tokyo where transport disruption and some falling trees were the main impacts.

Risk modelling firm AIR Worldwide has published an early insured loss estimate for the event. “After crossing more than 350 kilometers of the main Japanese island of Honshu—during which time it was undergoing extratropical transition and its winds were weakening to about 150 km/h—Roke moved out to sea in the North Pacific Ocean, where it has since further weakened,” said Dr. Peter Sousounis, principal scientist at AIR Worldwide.

Dr. Sousounis commented, “In terms of wind damage, Shizuoka prefecture was most heavily affected, although damage here and in other prefectures was mitigated by Roke’s short duration; the storm moved across central Japan in just 12 hours. Furthermore, Roke weakened quickly after landfall and its strongest winds remained over water as it moved across Japan and began extratropical transition, mitigating wind damage to onshore properties. All these factors contributed to Roke’s relatively low expected losses, despite the fact that the storm made landfall as a strong Category 2 typhoon, just 250 km southwest of Tokyo.”

Minimal structural damage has been reported across the area that typhoon Roke impacted but there has been a risk of severe flooding and landslide during and after the storm. Most of Roke’s damage has come from typhoon induced flooding and the storms strongest winds remained over the ocean as it moved across Japan. In total 1.21m people were affected by evacuation orders while Roke passed.

Dr. Sousounis stated, “Over the last several days, total precipitation amounts from Roke have exceeded 400mm at about a dozen monitoring stations; isolated mountainous regions have received 400-600 mm of rainfall. The rain from Roke has caused 28 landslides, according to the latest report from the FDMA, not to mention the flooding of streets and homes. Earlier this month, on September 2nd, another typhoon brought significant rainfall to Japan; though weaker at landfall, this storm—Tropical Storm Talas—was unusually large, with tropical storm force winds extending outwards up to 600 kilometers. It delivered up to 1,600 millimeters of rainfall in isolated parts of Nara Prefecture over a 24 hour period. By contrast, Roke’s smaller rainfall amount fell over the span of several days, mitigating its impact.”

Despite the intense winds Roke is only estimated to have caused between $150m and $600m of insured losses according to AIR Worldwide.

There are a number of catastrophe bonds with exposure to Japanese typhoons, including recently issued privately placed cat bond Kizuna Re Ltd., Montana Re Ltd. Series 2010-1 (a second event bond whose Class E tranche of notes are exposed to any qualifying events after being activated by the Japanese earthquake in March) and Vega Capital Ltd. (Series 2010-1). Market sources we have discussed this event with suggest it is unlikely that Roke will have been strong enough to trigger any of these bonds. Details of all these catastrophe bonds can be found in our Deal Directory.

Plenum Investments, a Zurich based investment manager with a focus on insurance-linked securities, commented that while their fund holds one position that is exposed to Japanese typhoon risks, the position will not see any loss as they say typhoon Roke was not strong enough to trigger it.

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