CATCo: No impact from Oklahoma tornadoes if insured losses below $5 billion

Specialist Bermuda based reinsurance-linked investment business CATCo Investment Management, which underwrites and manages portfolios of catastrophe reinsurance and retrocessional contracts using investment clients assets, has provided an update regarding the Moore, Oklahoma tornado event. CATCo says it expects no meaningful impact to its 2013 portfolio if the insured losses related to this event remain below $5 billion.

The tornado which struck Moore, a suburban town of Oklahoma City, on Monday 20th May caused widespread devastation and loss of life. The impact in dollar terms is as yet unknown, but it has been widely reported that the insured losses from this event are likely to be greater than $2 billion and many suggest it will be more impactful to the reinsurance market than 2011’s Joplin tornado.

CATCo is one of the larger providers of retrocessional reinsurance capacity in the market, it deployed over $2 billion of capacity at the start of this year, as a result it is likely to have exposure to tornado risk in Oklahoma.

In an update sent to the stock exchange today, CATCo said that it does indeed have exposure in that region to severe thunderstorm and tornado risks. CATCo stressed that it is too early for the industry, or itself, to confirm a definitive magnitude of the retrocessional insured loss. However based on the AIR Worldwide estimates of property replacement values at risk from the Moore tornado CATCo is able to give an estimated range of impact.

AIR said that it estimates the replacement value of properties within a 0.4-mile buffer zone around the track of the tornado at $2.2 billion and within a 1-mile buffer zone of the storm track as much as $6.4 billion. CATCo said that “At the lower and higher ranges of this 100% replacement value estimate, the modeled impact to the Company’s 2013 retrocessional portfolio net returns is 0% and 5%, respectively.”

So that means that were the tornado track to have been 2 miles wide for the entire 17 mile length of its journey and every property to have been 100% destroyed then CATCo may have suffered up to a 5% impact to the return of the 2013 portfolio. Clearly that’s not going to be the case as the track was only 1.4 miles wide, according to the National Weather Service, and only this wide at points along its path.

CATCo said that in its opinion the insured losses related to this tornado event will be below $5 billion and that at this level the losses would have no meaningful impact to its current portfolio. Given the above regarding the storm tracks width it seems unlikely at this stage that CATCo or its funds will see any impact from the event.

We will continue to update you as more information on the impact of the Moore tornado becomes available. Our other articles related to this event can be found below, most recent at the bottom.

– Moore, Oklahoma City, hit by devastating tornado

– Oklahoma tornado may cause catastrophe bond price movements

– Credit Suisse: losses from Moore tornado under $5 billion, no ILS fund impact

– Insured losses from Moore, Oklahoma tornado could surpass Joplin

– LGT Insurance-Linked Strategies: No impact expected from Oklahoma tornado

– Blue Capital: No material loss expected from Oklahoma tornado

– EQECAT: $2Bn to $5Bn insured losses from recent tornado events, including Oklahoma