Swiss Re Insurance-Linked Fund Management

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Plenum: No impact expected to cat bonds from European windstorm Christian


Swiss insurance-linked securities and catastrophe bond investment manager Plenum Investments has issued a statement saying that it does not expect losses from European windstorm Christian to reach the attachment point of any exposed catastrophe bonds.

The European windstorm, named Christian, St Jude, Carmen or Simone, depending on the forecasting organisation, blew through the UK, affected northern France, Benelux, Denmark, the Netherlands, Germany, Sweden and some Baltic States this week, but Plenum does not expect insured losses from the event will impact its ILS and cat bond fund.

Plenum explained that while damage from Christian is widespread the type of structures built in northern Europe will largely withstand the storms wind speeds; “First damage reports show many felled trees and the damage sustained was amplified by the fact that they were still covered in leaves. Some facades and structures of buildings were damaged, but most residential buildings are of a masonry construction and we do not anticipate major structural damage to those.”

European windstorm Christian has been compared to a storm named Jeanette from 2002, a storm which PERILS AG reported an industry wide loss of €1.264 billion. A similar number from Christian would likely not be sufficient to reach the industry loss attachment points of exposed catastrophe bonds.

Plenum Investments stated; “This would put the expected damages of Christian well below the attachment points of the European wind storm bonds in the portfolio of the Plenum CAT Bond Fund, hence we do not anticipate any adverse effect on the performance of the fund.”

It should be noted that Plenum is only referring to European windstorm catastrophe bonds which it holds in its funds portfolio and that there could be others, perhaps private cat bonds, which are potentially exposed. It is hard for us to say which are and aren’t exposed given that so many European windstorm cat bonds utilise an industry loss trigger which is weighted by exposure and specific Cresta zones.

If European windstorm Christian does result in an insurance industry loss of over €1 billion however, it could put some industry loss based reinsurance contracts or industry loss warranties at risk. This could push some losses into the collateralized and ILS market if any fund managers, or collateralized underwriters, have positions on exposed layers of reinsurance programmes.

As we wrote yesterday, PERILS AG is investigating windstorm Christian and will decide whether it qualifies as an event which is severe enough to collect loss data for and to report on. To qualify Christian needs to be a €200m market-wide insured industry property loss, which based on the reports of damage from across northern Europe at this time looks eminently possible.

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