Blue Capital listed ILS fund factors Harvey loss into August NAV

Stock exchange listed ILS fund strategy the Blue Capital Alternative Income Fund (formerly known as the Blue Capital Global Reinsurance Fund) has already factored the impact of hurricane Harvey into its August net asset value, reporting 0.45% performance for the month even after the losses are taken into account.

It’s a sign that the ILS fund, which is managed by reinsurance and insurance-linked securities (ILS) investment manager Blue Capital Management, is unlikely to take a major hit from the impact of hurricane Harvey, reflecting the lower industry losses that the private re/insurance market expects from that storm.

The 0.45% August 2017 return, despite the impact of Harvey, takes the Blue Capital Alternative Income Fund’s return to 3.12% year-to-date.

It is down significantly on the August 2016 return of 2.53%, but then the fund was only at 3.52% for the first eight months of the year.

Blue Capital Management said that the estimate of its losses due to Hurricane Harvey, net of recoveries from reinstatement premiums, totaled 2.4% of the opening net asset value for its Ordinary Shares in August. 

The impacts are still based on a combination of proprietary catastrophe modeling, standard industry risk models, a review of in-force reinsurance and retrocession contracts, as well as initial indications from Blue Capital’s clients and brokers, hence the impact to the fund could change if estimates rise or fall over the coming months, or actual losses are materially different.

The fact the Blue Capital ILS fund has managed such a positive return even after a major hurricane hit to the state of Texas reflects both the managers diversified portfolio and also the fact that Harvey is likely more of a flood than wind and surge event, hence the ILS market is not as exposed as it will likely find itself to hurricane Irma losses.

Blue Capital has also warned that it expects the hurricane Irma loss to be complex and as a result it continues to monitor for potential losses to its funds.