2017-08-25 - Av Henrik Sjöholm

Hurricane Harvey: small market reactions so far

Hurricane Harvey, set to make landfall in Texas on the night between Friday, August 25, and Saturday, August 26, has continuously increased its strength and is currently a category 2 hurricane on the Saffir-Simpson scale. It is currently expected to be a category 3 hurricane at the time of landfall. However, the expected impact on the liquid cat bond market is expected to be none or small, unless it develops in an unexpected way.

A major hurricane making landfall will, of course, cause considerable damage to property and threaten lives. Most of the costs will be carried by direct insurers and, possibly, reinsurers. Currently, modelling of the hurricane’s expected effects show no impact on the cat bond market and hence no impact on Entropics’ portfolio.

Reactions on the secondary market have also been calm, with a small number of transactions slightly below face value in one bond. However, we currently expect some minor short term impact on the market value in the secondary market on a few securities, which will be recovered post-event.

Entropics is currently monitoring the development and will report any major changes to the current assessment on our site. We would like to stress that the situation can change, as we assess probabilities of future developments.

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