Alterra Capital Holdings Limited today announced its exposure to the Japanese earthquake and tsunami disaster. They put their initial loss estimate at somewhere in the range of $60m to $100m. However it’s not just their insured losses that they announced, they also see an additional $25m of exposure to the event through their catastrophe bond investments.
At the end of 2010 Alterra’s financial report shows that they had $47.2m of investments in catastrophe bonds. Their investment in cat bonds appears well diversified across geographies and perils however todays announcement mentions ‘a catastrophe bond with exposure to Japanese earthquake and tsunami losses’. Alterra say that depending on the ultimate insured loss levels from the events in Japan this bond could cause them an investment loss of up to $25m.
We’re not sure which cat bond Alterra holds this $25m stake in. It could be Muteki Ltd., although that is a parametric bond meaning that it isn’t the amount of losses that defines a triggering event, rather the intensity and location of the earthquake.
Alterra certainly won’t be the only re/insurer with investment exposure to the Japanese quake as many of them hold positions on various catastrophe bond transactions.