Hurricane Milton losses likely below a 5% cat bond market impact: Icosa Investments

Commenting on hurricane Milton post-landfall, catastrophe bond fund manager Icosa Investments has said that it anticipates the impact to the catastrophe bond market will be below 5%.

The company explained, “Current estimates for insured losses from Milton are between 20 and 60 billion USD. However, this range is still subject to significant uncertainty, and figures could shift as more data becomes available in the coming weeks. Based on these loss estimates, we expect losses for the cat bond market of below 5%.

“A temporary markdown in Friday’s valuation is likely due to the ongoing uncertainty.

“The reduced retention levels for aggregate bonds will also play a temporary role in performance and needs to be monitored going forward.”

The company added that, “With these still significant losses for the reinsurance industry, premiums are expected to remain elevated or even rise further in the coming weeks. This creates an attractive entry point for investors in the cat bond market.”

CEO of Icosa Investments Florian Steiger also said, “Although it might not feel this way to the people in Florida facing extreme devastation from Hurricane Milton, the situation is a marked improvement compared to earlier concerns of a direct hit on Tampa as a potential Category 4 hurricane, which could have resulted in far higher insured losses than are now anticipated. From a cat bond investment perspective, this event will likely keep us engaged for some time, as loss reports from individual cedants begin to emerge in the coming weeks.

“While insured losses will still be substantial — likely well into the double-digit billion range — a further hardening of the reinsurance market seems possible. This will likely drive reinsurance premiums higher, including in the cat bond market. With the primary market season now underway, it will be interesting to see how these dynamics unfold. Additionally, topics such as “loss creep” and “attachment erosion” will be crucial in the coming months, as they may significantly influence ultimate loss estimates and payout structures.”

As we reported earlier, reinsurance brokers had pointed to a $15 billion to $40 billion range for the insurance market loss prior to landfall.

Other catastrophe bond market sources we’ve spoken to this morning are suggesting that losses to cat bonds will fall in the low single digit percentage of the market, so perhaps the lower-half of a 0% to 5% range. Time will tell.

Things should get clearer over the coming days and loss ranges will narrow somewhat.

Also read:

– Hurricane Milton: Pre-landfall broker loss estimates ranged $15bn to $40bn.

– Hurricane Milton Cat 3 landfall in Sarasota. Worst case Tampa loss scenarios avoided.

– Hurricane Milton: Insurance, reinsurance, cat bonds, ILS ready to respond.

– Some mutual cat bond and ILS fund NAVs fall further on hurricane Milton threat.

– Hurricane Milton industry loss at $25bn+ changes pricing narrative: Goldman Sachs.

– Hurricane Milton cat bond loss potential still in wide range: Icosa Investments.

– Hurricane Milton seen denting cat bond market -1.4% (excl. surge): Plenum.

– 33% chance hurricane Milton loss above $50bn. Would drive hard market: Euler ILS Partners.

– Hurricane Milton Cat 5 again. Tracks slightly south. Uncertainty still high, loss range wide.

– Safe to say hurricane Milton likely a $20bn+ insurance market event: Siffert, BMS.

– Hurricane wind speeds forecast across entire Florida Peninsula as Milton approaches.

– Mexico’s catastrophe bond presumed safe from hurricane Milton.

– Stone Ridge leads managers cutting mutual cat bond or ILS fund NAVs on hurricane Milton.

– Hurricane Milton could be a huge test for the entire (re)insurance market: Evercore ISI.

– Hurricane Milton losses could amount to tens of billions, but uncertainty high: BMS’ Siffert.

– As hurricane Milton intensifies, Mexico’s catastrophe bond comes into focus.

– Material hurricane Milton losses could change 2025 property reinsurance price trajectory: KBW.

– Cat bond & ILS managers explore options to free cash, as hurricane Milton approaches.

– Hurricane Milton: First Tampa Bay storm surge indications 8 to 12 feet.

– Hurricane Milton is biggest potential ILS market threat since Ian in 2022: Steiger, Icosa.

– Hurricane Milton forecast for costly Florida landfall. Cat bond & ILS market on watch.