Specialist Bermuda based reinsurance-linked investment manager CATCo Investment Management, who manage clients assets and deploy them as capacity for over $2 billion of retrocessional reinsurance portfolios, has published a stock market update commenting on the increased hurricane Sandy insurance industry loss estimate from PCS. CATCo’s comments relate to the size of the PCS estimate and the retrocessional loss reserve provision the firm had made back in October.
The industry loss estimate from PCS has jumped by 70.45% from the $11 billion the firm reported back in November to a new figure of $18.75 billion announced at the start of this week.
CATCo based the original retrocessional reinsurance loss reserve provision, which is already included in the published net asset value of its flagship fund the CATCo Reinsurance Opportunities Fund Ltd., was based on an industry loss figure of $20 billion. As the PCS loss estimate has not yet reached that level, the management of CATCo see no need to increase the loss reserve provision which is already in place.
It’s worth noting that the majority of CATCo’s exposures to Sandy are on an ultimate net loss (UNL) or indemnity basis, and so not triggered by the PCS industry loss estimate figure anyway. Rather, the management of CATCo finds the magnitude of the industry loss estimates as a good proxy for the actual losses they can expect from UNL contracts.
PCS will again re-survey affected insurers around 60 days from now and will update the loss estimate at that time if there has been any increase, or decrease, in reported loss estimates. CATCo said they will deliver another update on the impact of hurricane Sandy at that time.
CATCo previously said that hurricane Sandy could impact its 2012 gross expected returns for 2012 by up to 13.2% points and have been proactive in reserving for the loss and keeping investors informed on developments.
Read our recent article on CATCo’s increased capacity: CATCo grows by $350m at 1/1, deploys over $2 billion of retrocessional reinsurance capacity