Wildfire cat bond news

Pacific Gas & Electric Co’s (PG&E) $200m Cal Phoenix Re Ltd. (Series 2018-1) catastrophe bond has had its secondary market price marked down heavily by brokers who suspect that the cat bond will face a significant, if not total, loss due to the ongoing wildfire outbreak.

The toll of destruction from the ongoing outbreak of California wildfires continues to rise, as the number of structures destroyed has risen again to 12,406, suggesting an increasing loss for insurance, reinsurance and ILS market interests and pointing to an industry loss at the high-end, or above, current estimates.

According to specialist insurance-linked securities (ILS) and reinsurance investments manager Twelve Capital, one of the USAA sponsored catastrophe bond tranches and certain private ILS transactions are at risk of facing losses due to the ongoing California wildfire outbreak.

We reported yesterday in one of our articles on the ongoing California wildfire outbreak that electrical utility Pacific Gas & Electric Co. (PG&E) has been sued over the cause of the Camp wildfire, a move which could put investors in its $200m Cal Phoenix Re Ltd. (Series 2018-1) at risk of losses.

The number of residential and commercial structures destroyed by the ongoing outbreak of three California wildfire events has risen again, suggesting an increasing level of loss for the insurance and reinsurance industry.

Equity analysts from investment bank Credit Suisse believe that ongoing California wildfire outbreaks could cost the insurance and reinsurance industry between $5 billion and $10 billion, although they do not believe this would be sufficient to push any of the major insurers they cover to a fourth-quarter loss.

The current California wildfire outbreak is expected to drive losses of between $3 billion to $6 billion to the insurance and reinsurance industry, while there will also be an element of BI and demand surge to deal with as well, according to Moody’s Investors Service.

The ongoing outbreak of wildfires in California, which have reached record levels in terms of property destruction and deaths, are likely to mean that insurance and reinsurance industry losses from the wildfire peril will also reach a record level in 2018, according to A.M. Best.

The valuations or prices of investments in the Stone Ridge Asset Management reinsurance mutual funds and the Markel CATCo listed retrocession fund were dented by the California wildfire threat in recent days.

The ongoing outbreak of wildfire activity in California has continued to destroy property over the last 24 hours, with the number of destroyed structures now standing at 7,150 across the three wildfire outbreaks and uncertainty still remaining over whether utility PG&E will be found liable for the most severe of the blazes.