Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Update on Mexican earthquake and MultiCat Mexico 2009 cat bond


Late yesterday we wrote that a large earthquake which struck Mexico had the potential to be a threat to the parametric MultiCat Mexico 2009 Ltd. catastrophe bond. The location where the earthquake struck was very close to one of the defined zones which a qualifying event must occur within, had the correct magnitude at Mw7.4 and was well within the depth range at just 20km deep for a triggering event to qualify. The earthquake epicentre location now seems to put it just outside the zone by as little as 30km.

We’re told that EQ Zone C, the only zone in which this quake could have qualified as a triggering event, most southerly boundary is at 17 degrees north. The epicentre of the quake has been recorded by the USGS at 16.6 degrees north. This could change, but we’re told it’s unlikely to move enough to put the quake into the zone where the cat bond could be triggered. If this is the case then it would put yesterdays Mw7.4 quake in EQ Zone B below, but for an event to trigger MultiCat Mexico 2009 in that zone it must have a magnitude of Mw8.0 or higher.

So, right now it looks like there is a good chance that the $140m Class A earthquake exposed notes issued by MultiCat Mexico 2009 (and their investors) will be safe from this earthquake event. If it is indeed safe we will likely hear nothing further, if it is still deemed at risk or the epicentre recording is moved then we will likely be able to update you again.

Risk modeller EQECAT have reported on this earthquake event and put an insured loss estimate of less than $100m on it.

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