According to a Bloomberg article one of the mutual ILS funds managed by New York based Stone Ridge Asset Management has fallen 8% on the approach of hurricane Irma, as the manager marked it down in expectation of losses.
Bloomberg reported that an investor in the Stone Ridge Reinsurance Risk Premium fund noticed a drop of more than 8% in the mutual ILS fund’s value yesterday (Thursday 7th September).
Apparently Stone Ridge marked down the fund based on model projections of losses from hurricane Irma.
This seems a prudent approach, given hurricane Irma remains on track for Florida and the forecast still shows a major event unfolding, communicating the potential for impact to investors.
The catastrophe bond market, which this mutual ILS fund of Stone Ridge’s invests in, as well as quota share reinsurance and other private collateralized reinsurance deals, is likely to experience price declines today, as the last normal day of trading (week day) before Irma is forecast to approach Florida.
It’s possible other traded ILS funds may mark down their NAV’s based on hurricane Irma’s threat, if the forecast remains fixed on a major Florida landfall.
Update: The Stone Ridge ILS and reinsurance interval syle mutual fund, which invests more in sidecars and quota shares than cat bonds, dropped as much as 11% on Irma’s threat.