Blue Capital warns on complexity of hurricane Irma loss

Reinsurance and insurance-linked securities (ILS) investment manager Blue Capital Management warned its shareholders in the Blue Capital Alternative Income Fund (formerly known as the Blue Capital Global Reinsurance Fund) of the complexity of the loss from hurricane Irma.

The Blue Capital fund invests in peak catastrophic risk exposures, in catastrophe bond, private ILS and collateralized reinsurance form, so is bound to face some losses from recent hurricane events.

The ILS manager said that it has now activated its normal post-event procedures for estimating any potential impact to the portfolio of the ILS fund, a process it said will involve proprietary catastrophe modeling, standard industry risk models, an in-depth review of the portfolios in-force contracts, as well as initial indications from clients and brokers.

However, Blue Capital warned that hurricane Irma could be a complex loss, saying that, “The actual losses from this event may ultimately differ materially from estimated losses due to the nature of the risks assumed, the complexity of the assessment of damages and the limited number of reported claims received to date.”

With the estimates for the insurance and reinsurance industry wide loss from hurricane Irma coming down, Karen Clark & Company’s up to $25 billion being the latest, cedents may be having more difficulty than usual identifying their exposure as industry estimates can play a key role in that.

Also the complex nature of wind versus water in this event, like Harvey and the Florida hit being over such a wide area could also result in a more complex loss assessment process for reinsurance firms and ILS investment managers affected.

Blue Capital Management said it will continue to monitor the event for potential losses to the company.