Swiss Re Insurance-Linked Fund Management

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Plenum Investments: No impact to ILS fund expected from hurricane Isaac


Swiss insurance-linked securities investment manager Plenum Investments has published an update on their fund and any exposure it has to hurricane Isaac which is currently impacting Louisiana and the Gulf coastal region. Hurricane Isaac continues to batter the Louisiana coastal counties and high winds and heavy rain are affecting cities such as New Orleans. Flooding is being reported in some coastal counties where levee’s have been topped, but the flood defences in New Orleans are holding.

Plenum do not expect any impact to the catastrophe bond and insurance-linked securities positions that its fund holds. Plenum said in its update; “CAT bonds are usually not constructed to make payments on category 1 storms, even if they make landfall in a metropolitan area, as their wind speeds are insufficient to cause major damage to buildings.”

Hurricane Isaac remains a category 1 storm at this time but as Plenum says the majority of cat bonds are structured so as to provide cover for the most extreme of events, not lower severity storms, and so the majority of exposed cat bonds can be considered safe.

Plenum Investments agree with our assessment that the Louisiana Citizens cat bond, Pelican Re Ltd. (Series 2012-1), is one which could be exposed due to the way that deal has been structured to provide its cover; “Only one outstanding bond, Pelican Re is exclusively covering hurricane risk in Louisiana. This bond, due to its highly exposed insurance portfolio, bears the highest risk of being attached, even if we consider this unlikely.”

Plenum went on to explain that it did not invest in the Pelican Re cat bond due to the elevated risk profile of that transaction. In addition Plenum said that it does not hold much exposure at all to Louisiana, and the funds exposure to the Gulf coast as a whole is very low at just 5% of the overall portfolio of the cat bond fund. Because of this low exposure to the region and the fact that Plenum does not hold a position in the Pelican Re deal, it does not expect any impact to any positions within the fund due to losses from hurricane Isaac.

You can see hurricane Isaac’s position and forecast path here.

Our article from earlier today details some of the insurers, reinsurers and catastrophe bonds which have been at risk from hurricane Isaac.

Register today for ILS NYC 2023, our next insurance-linked securities (ILS) market conference. Held in New York City, February 10th, 2023.

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