Credit Suisse puts windstorm Xaver insured loss at €1.4bn to €1.9bn

by Artemis on December 12, 2013

Insurance-linked securities (ILS) and reinsurance-linked investment manager Credit Suisse has issued its first estimate for the insurance industry loss tally likely to stem from last week’s European windstorm Xaver.

Credit Suisse puts an early estimated range of €1.4 billion to €1.9 billion, approximately $1.9 billion to $2.6 billion, as the likely bill for windstorm Xaver. This range is similar to the asset managers first estimate of losses for European windstorm Christian.

At this range of losses Credit Suisse does not expect any impact to its CS Iris Low Volatility Plus fund, according to its update. The update from comes via the DCG Iris London Stock Exchange listed insurance-linked securities (ILS) fund, which is managed by Dexion Capital as a feeder fund into CS Iris Low Volatility Plus.

Credit Suisse said that initial assessments suggest that the wind damage from windstorm Xaver will not be as significant a loss as that caused by Christian in October. However Xaver had a much higher flood and storm surge component, which Credit Suisse notes is inherently difficult to assess, although flood defences have limited damage from Xaver to some degree.

Credit Suisse said that it monitored windstorm Xaver through its development using its proprietary European wind modelling tool which allowed it to take near-real time wind speed data, apply it to real insurance exposure information and to calculate an estimated insured industry loss by zone, country and line of business. This proprietary modelling tool also factors in a storm surge and flood component, said Credit Suisse.

As a result of this initial analysis and based on currently available information Credit Suisse estimates that the insurance industry loss from European windstorm Xaver is in the range of €1.4 billion to €1.9 billion, although likely towards the lower end of the range. Based on this it does not expect any impact to the Iris Low Volatility Plus Fund and as a result there will be no impact to DCG Iris while losses remain at this estimated level.

All the information currently points to windstorm Xaver resulting in a slightly lower insured industry loss than windstorm Christian. However it will be some weeks before a better estimate becomes available as claims are made and reported. At this level of losses Xaver is unlikely to have any impact to catastrophe bonds, but could potentially impact some reinsurance programs already exposed due to the number of severe weather loss events hitting Europe in recent months. There is a chance that this could result in some overspill of losses into collateralized reinsurance portfolios which could be managed by ILS firms.

While the CS Iris Low Volatility fund appears safe Credit Suisse also manages higher risk portfolios in its Enhanced fund. At this current estimated loss level the Enhanced fund is unlikely to be affected by Xaver either, but at this stage we cannot be sure and have no reports to that effect.

Read our other European windstorm Xaver coverage, most recent first:

- Flood defences keep windstorm Xaver insured losses down

- ILS fund managers expect no cat bond impact from windstorm Xaver

- European windstorm Xaver; updates from risk modellers

- PERILS to assess European windstorm Xaver industry loss potential

- European windstorm Xaver brings another reminder of winters threat

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