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Twelve Capital warns of “potentially significant” aggregate cat bond erosion from Ian


After hurricane Ian, there is the potential for “significant” erosion to aggregate catastrophe bonds, according to investment manager Twelve Capital.

Twelve Capital logoIn its latest update on major hurricane Ian, Twelve Capital, the Zurich-headquartered insurance-linked securities (ILS) and reinsurance linked fund manager, said that it is now working off a range of industry loss estimates from $50 billion to as high as $70 billion, just for the Florida landfall losses from the storm.

“The full extent of the damage will only become clear over the coming weeks,” Twelve Capital explained.

Adding that, “People are only beginning to return to their homes, and with this the first claims will soon start coming in and within a few weeks we will start seeing how large the damage was.”

Twelve Capital reiterated its forecast that the catastrophe bond market faces losses of principal, including for FEMA’s FloodSmart Re cat bonds.

“At this level of industry loss, we are expecting a number of catastrophe bonds to be depleted, particularly those from the National Flood Insurance Program (NFIP) called “Floodsmart”, some of the indemnity bonds purchased by Floridian insurers, and potentially the junior tranches of some index-linked catastrophe bonds should the industry loss total be at the higher end of estimates, or grow beyond them,” the ILS fund manager explained.

But Twelve Capital also expanded the range of catastrophe bonds it is warning about the potential for losses on, adding aggregate cat bonds to the list.

Saying, “In addition, this event will have added potentially significant erosion to any aggregate catastrophe bonds, meaning that should there be other meaningful events in the remainder of 2022 that more catastrophe bonds could be at risk from an aggregation of events.”

Finally, Twelve Capital explained that the broker pricing sheets, for secondary market prices of catastrophe bonds, adding that these “indicate valuation losses for most funds and the cat bond market in the mid-single digit area.”

Also read:

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KatRisk pegs hurricane Ian insured losses at $46bn, +/- $16.1bn.

Verisk estimates hurricane Ian loss up to $57bn, warns could breach $60bn.

Swiss Re cat bond index plummets on Hurricane Ian. US Wind down 32%.

Well over $1bn of cat bond mark-downs expected after hurricane Ian.

Hurricane Ian industry loss estimated close to $63bn by KCC.

Plenum says estimated $50bn hurricane Ian to dent its cat bond funds.

Hurricane Ian industry loss estimated up to $40bn by Fitch.

Hurricane Ian to force a reevaluation: Millette, Hudson Structured.

Hurricane Ian to cause Florida indemnity & FloodSmart cat bond losses: Twelve.

Hurricane Ian Florida insured wind & surge losses $28bn – $47bn: CoreLogic.

Hurricane Ian economic loss in Florida around $65bn: RMSI.

Hurricane Ian: A historic hit for Florida, no matter the quantum of loss.

Hurricane Ian to impact cat bond funds. Plenum says hit to be “limited”.

Hurricane Ian to add reinsurance rate momentum, disrupt Florida market: KBW.

A particularly broad cat bond mark-down this Friday?

Cat modeller data hinted at hurricane Ian’s $50bn+ industry loss potential.

Hurricane Ian: Rapid weakening may see losses nearer $32.5b, says KBW.

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