Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Clariden Leu don’t expect any impact to funds from U.S. tornado outbreak


The recent tornado outbreak in the U.S. has caused significant loss of life, damage and is expected to amount to at least $5 billion (some say as high as $7 billion) in insured losses. Two classes of catastrophe bond notes issued by Residential Reinsurance 2008 Ltd. and Residential Reinsurance 2009 Ltd. have been accumulating aggregate losses from recent severe thunderstorms and Mariah Re Ltd. has also experienced qualifying loss events.

Insurance-linked securities investment manager Clariden Leu have published their latest monthly managers comment on the performance of their insurance-linked strategy funds recently. In it they discuss the scale of the tornado and thunderstorm events but discount the possibility of their funds being affected.

One reason they highlight to explain why they aren’t expecting an impact is that they don’t currently hold a position in the Mariah Re transaction. The Mariah Re cat bonds were not large transactions so not every investment manager will have been able to invest in these issues. Managers such as Clariden Leu look at every new cat bond transaction and carefully select which to invest their funds in, making sure to keep their portfolios well balanced and risks to a minimum so it’s also possible that they found that Mariah Re didn’t complement their portfolio at the time of issue.

Clariden Leu say that they do hold investment positions in some other catastrophe bonds which include coverage for severe weather in the U.S. However, they explain that the localized nature of these type of weather events limit the geographical extent of damage for a qualifying event which they say serves to make the impact insignificant for most investment positions. They conclude “Hence, we do not expect any impact on the performance of our insurance-linked funds based on the current tornado outbreaks that have occurred in the USA”.

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