Catastrophe bonds and insurance-linked securities news

In the wake of hurricane Ian, it’s going to be particularly challenging to have an accurate view of catastrophe bond market impacts in the short-term, which we’re being told could result in a particularly far-reaching mark-down of cat bond names on brokers’ secondary pricing sheets this Friday.

Major hurricane Ian is expected to cause some impacts to catastrophe bonds, with some losses possible to that segment of the insurance-linked securities (ILS) market, according to our sources, while specialist investment manger Plenum Investments said the impact to its funds would be negative but “limited”.

Major hurricane Ian is likely to deliver an insurance industry loss of greater than $20 billion, according to BMS Senior Meteorologist Andrew Siffert.

Major hurricane Ian puts a significant chunk of the global catastrophe bond market at-risk of potential losses, given there are in excess of $5 billion of US named storm specific, or well documented multi-peril cat bonds from nationwide sponsors, with Florida as a named covered state.

With major hurricane Ian approaching its Florida landfall, the main mutual insurance-linked securities (ILS), catastrophe bond and reinsurance linked investment funds have experienced some declines, with Stone Ridge Asset Management’s strategies leading the way.

As major hurricane Ian approaches Florida, it’s clear this storm could be the first major test for the re-underwriting that ILS fund markets have been undertaking over the last few years and renewal seasons, providing a test for ILS fund manager and reinsurer processes and discipline.

Eclipse Re Ltd., a private syndicated collateralised reinsurance note, private catastrophe bond issuance and reinsurance transformer platform owned and operated by Artex Capital Solutions, has completed two more issuances of private cat bond notes, totalling $76 million of new risk capital issued.

So far, major hurricane Ian’s approach to the west coast of Florida and the Tampa Bay region has not stimulated a significant amount of catastrophe bond trading, with the secondary market relatively quiet. Except for one telling trade that shows investor nerves over potential storm surge impacts are rising.

Twelve Capital, the insurance-linked securities (ILS) and reinsurance linked fund manager, agrees with other opinions that recent super typhoon Noru may cause a default of the Philippine government’s World Bank facilitated IBRD CAR 123-124 catastrophe bond.

Driving home the continued uncertainty over the eventual insurance, reinsurance and insurance-linked securities (ILS) market impact from hurricane Ian, investment manager Twelve Capital said that modelled loss scenarios range from substantial to nothing for its ILS portfolios.