Reinsurance and retrocessional reinsurance investment manager Markel CATCo said today that it does not expect any significant hit to the portfolio of its flagship listed fund, the CATCo Reinsurance Opportunities Fund Ltd., as long as the industry loss from hurricane Harvey’s wind and flood impacts remains below $10 billion.
The ILS and reinsurance linked investment manager notes that “It is still very early to comment on the level of potential impact to the investment portfolio,” but offered a brief update to the shareholders in its stock exchange listed retro reinsurance investment fund strategy.
Markel CATCo notes that early estimates from catastrophe risk modeling firms all point to insured wind losses in the low single digit billions of dollars. For example AIR Worldwide said that wind and storm surge could lead to up to $2.3 billion of insurance and reinsurance loss.
Markel CATCo notes that the flooding remains the big question, as it is too early given the ongoing nature of the catastrophic events in Texas to estimate any impacts to insurance and reinsurance interests.
However, the manager gives some guidance in saying that, “If the total wind and flood insured losses remain below $10 billion the impact on the investment portfolio is not expected to be significant.”
Currently estimates of the total private market insurance and reinsurance impact from hurricane Harvey range wildly, from single-digit billions up to $20 billion, as we wrote earlier today.
Markel CATCo is saying that its exposures would be deemed largely attritional in nature it seems, if the industry loss remains below $10 billion, while above that could result in a slightly larger hit to its ILS fund portfolio assets.
Given where Markel CATCo’s retro strategies play, offering a pillared retro product to major reinsurers, it is to be expected that any major catastrophe event would result in some impacts.
However, the pillared approach means each particular peril and region can only cause a certain amount of loss, while the investment manager also buys ILW’s as its own reinsurance protection as well. For example a Gulf wind event can only cause a maximum 10% loss to the fund, even under the most severe scenarios.
It’s also worth remembering that Markel CATCo is known for prudent management of loss exposures, quickly acting to segregate any exposed positions so as to minimise the impact to investors and allow those potential losses to be managed until the full impact is understood.
The Markel CATCo listed fund saw its share price fall around 7% on Harvey-related uncertainty, but these should recover as the size of any loss impact becomes clearer.
It could be some days before it’s known whether the industry loss, including private market wind and flood impacts, will be above $10 billion.