2022 Atlantic hurricane season

Major hurricane Ian is expected to cause some impacts to catastrophe bonds, with some losses possible to that segment of the insurance-linked securities (ILS) market, according to our sources, while specialist investment manger Plenum Investments said the impact to its funds would be negative but “limited”.

Major hurricane Ian has caused catastrophic damage across the landfall region on Florida’s west coast, with a storm surge that has flooded coastal areas, wind damage from hurricane force gusts and flooding caused by torrential rains.

Major hurricane Ian is likely to deliver an insurance industry loss of greater than $20 billion, according to BMS Senior Meteorologist Andrew Siffert.

As major hurricane Ian approaches Florida, it’s clear this storm could be the first major test for the re-underwriting that ILS fund markets have been undertaking over the last few years and renewal seasons, providing a test for ILS fund manager and reinsurer processes and discipline.

The major hurricane Ian landfall scenario has worsened considerably after the NHC found the storm has intensified rapidly again, to now pack 155 mph sustained winds as a high-end Category 4 storm on approach to Florida.

Major hurricane Ian’s impacts and losses are set to add to the capital pressure experienced by Floridian primary insurers and even the state’s new $2 billion Reinsurance to Assist Policyholders program is unlikely to make insurers whole again, given they now lack private reinsurance protection.

Hurricane Ian remains a strong and dangerous Category 3 major hurricane with 120 mph sustained winds as it approaches Florida and already its effects are being felt, with storm surge flooding reported across the Lower Florida Keys and tropical storm force winds now hitting the state.

The forecast models have been updated again and once more major hurricane Ian’s forecast path has shifted east a little further, bringing the landfall on Florida’s west coast slightly earlier and just slightly south of Tampa Bay, near to Sarasota.

So far, major hurricane Ian’s approach to the west coast of Florida and the Tampa Bay region has not stimulated a significant amount of catastrophe bond trading, with the secondary market relatively quiet. Except for one telling trade that shows investor nerves over potential storm surge impacts are rising.

The challenges that have been and continue to be faced by Florida’s property insurance marketplace effectively raise the risk of more financial impacts for Florida’s taxpayers, should a major loss event occur from hurricane Ian, it seems.