2018-10-10 - Av Henrik Sjöholm

Update 2 on hurricane Michael

Hurricane Michael has intensified more than previously forecast and has during the evening made landfall at Mexico Beach in Northwestern Florida as a Category four hurricane. The increased intensity means that insured losses will increase compared to previous forecasts and could potentially entail insurance payouts from cat bonds and Entropics Cat Bond Fund. Small deviations of the continued path of the hurricane could, however, have large impact on the losses.

Following the development, it is currently difficult to make precise estimates of the impact on the cat bond market. Based on available modelling data, Entropics has estimated the loss for Entropics Cat Bond Fund at between zero and one percent, but large uncertainty regarding the final loss remains. In the short term we expect some pricing volatility for bonds on the secondary market until the loss situation has been clarified. This short-term impact will be quickly recovered if turns out that the event did not affect portfolio cat bonds.

The total losses from the hurricane are now estimated at more than double previous estimates this week. Hurricane Michael (wind speed 69 m/s) is the strongest hurricane to make landfall in mainland USA since hurricane Andrew (76 m/s) in 1992. The insured losses are, however, limited by the fact that the region is one of the less densely populated in Florida.

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