2018-09-12 - Av Henrik Sjöholm

Update on Hurricane Florence

The Atlantic Hurricane Florence is approaching the US East Coast and is set to make landfall in North Carolina or South Carolina within the next 48 hours. It is currently a category 4 hurricane with potentially catastrophic effects in the affected areas. Still, considerable uncertainty regarding the exact path and potential landfall location of the hurricane remains.

Looking at the ILS and cat bond markets, the insurance exposure to the hurricane is limited, due to relatively low population density. Yet, insurance losses can be considerable and we believe that the largest impact will be carried by re/insurance and collateralized reinsurance instruments (private deals). Cat bond risk exposure is more limited but can be affected.

The secondary market has not yet reacted to the event. A stress test of Entropics portfolio using historical events of the similar intensity and relevant geography indicate that hurricane Hugo (category 4, 1989) would not have caused any losses, while hurricane Hazel (category 4, 1954) would have caused losses of ca 1% of the NAV. Entropics continues to monitor Florence, and will revert with additional information as the situation develops.

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