Swiss Re Insurance-Linked Fund Management

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Investors suggest Ianus Capital loss from Turkey quake unlikely


Further to our earlier article alerting you to the potentially exposed Ianus Capital catastrophe bond which covers the whole of Turkey for earthquake risks, it seems that investors are pretty confident that the cat bond won’t face losses due to the location of the earthquake. The M7.2 quake has caused widespread damage in the area it hit, but that region of Turkey only makes up a very small percentage of the cat bond exposure.

Zurich based insurance-linked securities investment manager Plenum Investments, has issued an alert stating that they see a loss as unlikely. They hold a small position in the Ianus Capital catastrophe bond, which through Munich Re provides cover to the Turkish Catastrophe Insurance Pool (TCIP). The catastrophe pool has a very low exposure to the region that the earthquake occurred in, the Turkish region of Van, as low as 0.15% for the region of Van and 2.5% for Eastern Anatolia as a whole.

Because of this, Plenum believe that it is highly unlikely that insured losses in the region would be sufficient to trigger a payment under the terms of the Ianus Capital cat bond. Their own in-house remodelling of the event also indicates that there will be no losses to the cat bond.

Other investors we’ve discussed this with today echo this sentiment. Turkey is greatly exposed to quake insured losses in the major cities and tourist areas where insurance penetration is much higher. These outlying regions however do not have a high insurance penetration and as a result don’t contribute as much towards the cat bonds expected losses.

Of course this isn’t a guarantee that no losses will be faced, but investors are usually pretty close to the money when making a call as to whether they will face a material loss themselves.

We’ll keep you updated.

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