The stock exchange listed Blue Capital Alternative Income Fund (formerly known as the Blue Capital Global Reinsurance Fund) has reported a negative return for October 2017, as the recent California wildfires added to losses for the year, although at a much smaller level than the recent hurricanes.
The Blue Capital Alternative Income Fund is broadly exposed to collateralized reinsurance and retrocession risks, including to many regional ceding companies, hence there is no surprise that the ILS fund has picked up some small exposure to the California wildfires, an event now estimated to have caused industry-wide losses of up to $10.5 billion.
The fund, managed by Sompo International owned third-party reinsurance and ILS capital manager Blue Capital Management, will not be alone in facing a negative October, now that the California wildfire loss estimates have risen to this level.
For October 2017 the Blue Capital Alternative Income Fund reported -0.39% performance for the month, taking its year-to-date performance down to -23.99%, down from -23.69% at the end of September.
The October loss is much smaller for the Blue Capital ILS fund, following the -26% hit from hurricane losses in September.
The Blue Capital ILS fund said that the net asset value of its shares has been hit by the three major hurricanes from August and September, the two earthquakes in Mexico, and now also the recent wildfires in California.
It’s unprecendented in the history of the ILS market for a fund to be talking about losses from so many major events, suffered over such a short period of a year.
Estimates have been made using proprietary catastrophe models, standard industry risk models, an in-depth review of in-force reinsurance contracts and initial indications received from clients and brokers, Blue Capital Management said.
We understand that a number of other ILS funds that underwrite collateralized reinsurance and retrocession are also facing a further hit from the California wildfires and could face another month of negative returns in October as a result.
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