Catastrophe bonds and insurance-linked securities news

Specialist insurance and reinsurance-linked investment manager Twelve Capital has highlighted some uncertainty with respect to the final central pressure figure that will get reported for hurricane Otis, but still believes it is probable the Mexican government’s exposed catastrophe bond tranche will face a 50% loss of principal.

Despite being home to a high frequency of natural catastrophes, re/insurance penetration remains low across much of Asia, but as risk accumulation and demand for protection rises, there’s an opportunity for the catastrophe bond market, according to Peak Re’s CEO, Franz-Josef Hahn.

This video features the final session of the day at our Artemis ILS Asia 2023 conference held in Singapore on July 13th 2023, a panel discussion with experienced insurance-linked securities (ILS) investment managers on the state of the market, in Asia Pacific and globally, as well as giving their ILS outlook.

Hurricane Otis slammed into Mexico’s Pacific coast yesterday morning as a significant category 5 storm with sustained winds of 165 mph and has caused significant damage, but its rapid intensification was missed by all the major weather models, which RMS’ James Cosgrove calls a “monumental” miss.

At a meeting this week of the trustees of the Florida State Board of Administration, the planned asset allocation target changes for the near $190 billion Florida Retirement System pension fund were approved, with insurance-linked securities (ILS) set at 1%.

There is a “high probability” that holders of the $125 million Pacific hurricane tranche of the Mexican government’s IBRD / FONDEN 2020  catastrophe bond face a 50% loss of notional, which would equate to a $62.5 million loss for the cat bond market, investment manger Plenum has explained.

Plenum Investments maintains its “higher for longer” outlook for catastrophe bond investment returns, saying that even though cat bond risk spreads may have dropped since their peak, this is still an attractive point to enter the market and fixed income investors should seriously consider the asset class.

The Government of Mexico’s catastrophe bond is facing its most severe threat of the current Pacific tropical cyclone season, as hurricane Otis has rapidly intensified to a category 5 storm and its central pressure has deepened sufficiently to trigger the $125 million IBRD / FONDEN 2020 tranche of notes that are exposed.

The World Bank has ambitious plans to expand its use of catastrophe bonds for member countries by roughly 400% over the next five years, growing the amount of World Bank issued cat bonds outstanding to as much as $5 billion, Bloomberg has reported.

USAA, likely the most prolific and consistent of sponsors of catastrophe bonds, is back with what will be the 42nd we have listed from the company, seeking $300 million or more in multi-peril US reinsurance protection from the capital markets through a Residential Reinsurance 2023 Limited (Series 2023-2) issuance.