2017-09-26 - Av Henrik Sjöholm

Hurricane Maria could cause large insured losses

Hurricane Maria, which recently caused devastation on Puerto Rico and several Caribbean islands, could also be a larger insurance event than initially expected. Hence, the event could have some impact to the cat bond market and the portfolio.

According to a recent announcement by AIR Worldwide, the industry insured loss could amount to between $40 billion and $85 billion. As the AIR estimate is considerably higher than those of industry analysts, we are likely to see uncertainty affecting secondary market prices for a few cat bonds until the situation clears.

Entropics monitors the development and will provide additional information as it becomes available.

The Maria losses adds to a year of large insured losses. Analysts at Morgan Stanley estimate the 2017 insured catastrophe losses at $106 billion to $187 billion to date this year, which would make 2017 one of the three costliest, and possibly the costliest, years this since 2000. The global average 2000-2015 was $50 billion. As a result, Morgan Stanley expects to see reinsurance price increases, but do not estimate how widespread they will be.

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