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No cat bond impact from hurricane Dorian: Plenum Investments


Specialist insurance-linked securities (ILS) investment manager Plenum said that given hurricane Dorian’s path remained largely offshore of the United States, it does not expect the eventual insurance and reinsurance market loss will trigger any of its catastrophe bond positions.

Zurich based specialist insurance-linked securities (ILS) and catastrophe bond investment manager Plenum Investments is a long-time investor in catastrophe bonds and established funds.

As a result, the asset manager has positioned in many cat bonds it has invested in over recent years and its determination that hurricane Dorian is unlikely to trouble any of them should hold true for the rest of the outstanding market in that case, we’d imagine.

Plenum explained further that hurricane Dorian is now moving very closely to the Outer Banks in North Carolina and its intensity is lower at a category 1 storm, the lowest on the scale.

In addition, hurricane Dorian’s forward speed has increased to around 20km/h today, meaning it will move quickly away from the area and coast, lowering the risk of prolonged heavy rainfall and tropical force winds on the Carolinas coast.

Because of these factors and after its latest modeling analysis, Plenum explained, “we therefore do not expect any losses on the positions held in the Plenum CAT Bond Fund.”

As well, the cat bond focused investment specialist also noted that secondary market cat bonds should rebound in value, saying, “we expect a rapid recovery in prices from the bonds that were marked down last Friday.”

With reports of insurance and reinsurance market loss estimates now coming in for the Caribbean and Bahamas, in the coming days we should also find out how large an impact Dorian had on the United States coastal regions.

While it may not be sufficient overall to trouble any catastrophe bonds, the chances of some ILS structures being impacted, such as collateralised reinsurance or sidecars, taking some minimal losses from the storm may be possible. But we’ll have to wait and see.

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