2018-03-28 - Av Henrik Sjöholm

Update on winter storm Riley’s impact on aggregate cat bonds

In early March, the winter storm Riley struck the US Mid-Atlantic coast with strong winds and massive snowfall. While it was an unusually severe storm, with rapidly decreasing pressures and hurricane force gusts, it would normally not affect any cat bonds.

Due to previous events in 2017, with an extreme hurricane season and the most destructive California wildfire season in history, some bonds featuring aggregate deductibles and multi-peril insurance coverage have seen erosion of the retention amounts. Hence, some bonds are now closer to attachment and priced accordingly in the market.

In the past weeks, updated loss estimates regarding the wildfire season and estimates regarding the impact of winter storm Riley have added to the eroded retentions of some bonds. For Entropics, this pertains to Caelus V and Residential Re.

Some uncertainty about the final loss will persist in the coming months. The annual reset of the retention amounts regarding the affected bonds will occur during May or June.

We continue to monitor the development closely and report any major changes.

Photo: Massachusets National Guard / CC-BY 2.0

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