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Credit Suisse ILS gives hurricane Ian industry loss best estimate of $54bn

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Credit Suisse Insurance Linked Strategies Ltd., the dedicated ILS fund management and investment arm of the global investment bank, has estimated that industry losses from hurricane Ian will fall in a range from $45 billion to $65 billion, with a best estimate of $54 billion.

Credit Suisse Insurance Linked Strategies logoIn an update to clients published on October 6th, the Credit Suisse Insurance Linked Strategies (ILS) team explained that hurricane Ian caused widespread impacts in Florida, with significant damage to property and autos from wind, storm surge and flooding.

As a result, “Insured property damage is widespread,” but the Credit Suisse ILS team noted that, “A large part of the damage is related to coastal flooding.”

Explaining the potential impacts to insurance-linked securities (ILS) and catastrophe bonds, the Credit Suisse ILS update says, “The ILS market has a high exposure to U.S. wind related insurance losses, in particular the cat bond market with approximately 70% of the outstanding market volume exposed to such risk.

“The market experienced mark-to-market losses, while spreads widened significantly at September month-end due to uncertainty on the severity of the impact from Hurricane Ian.”

Fluctuations in value of cat bonds are expected to persist, the ILS investment manager explained.

Saying that, “Pricing volatility in the cat bond market will likely remain high in the coming weeks as the market continues to evaluate the industry losses related to this event.”

While flooding is generally not covered under standard property insurance policies, the Credit Suisse ILS team note that there is ILS and reinsurance market exposure, such as through the NFIP reinsurance tower and FloodSmart cat bonds.

The estimate given includes NFIP losses, as well as private insurance and reinsurance market impacts.

“As Ian has caused more damage and severe destruction than anticipated before landfall last Thursday and as information has gradually become available, the recent industry-wide insured loss numbers have increased significantly since last week,” the Credit Suisse ILS team said.

Explaining that, “Our current assumption is that insured losses from Hurricane Ian range from USD 45 billion to USD 65 billion, including losses from the NFIP, with a best estimate at USD 54 billion.”

The estimate sits firmly in the range of modelled loss estimates currently announced, with Credit Suisse’s current best estimate sitting above the average across the modellers, which is a little lower at $51 billion.

The ILS investment manager also noted that private ILS transactions are awaiting independent actuarial valuations, which will enable the Credit Suisse ILS team to provide more accurate performance expectations for clients.

The manager also cautioned that uncertainty remains high and so loss estimates remain subject to change.

Read all of our coverage of hurricane Ian, and our analysis on the potential market losses, here.

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