Twelve Capital Event Update – 30 August 2021

Hurricane Ida

Over the weekend, Hurricane Ida rapidly intensified in the warm waters of the Gulf garnering wind speeds of more than 250 km/h (almost becoming a category 5 storm), and being one of the strongest storms to ever hit Louisiana. At mid-day local time on Sunday 29 August, Ida finally made landfall at Port Fourchon, Louisiana as a Category 4 major hurricane. Since making landfall, Ida has travelled north, currently passing to the east of Baton Rouge as a Category 1 hurricane. Over the next 12 hours, it is predicted to weaken to a tropical storm as it heads through Tennessee.

In addition to the damage from strong winds, Ida has been causing damage from storm surge and inland flooding, which will also test the new flood defences (levees) that were put into place after Katrina. Thus far, indications have them as working, unlike in Katrina where a vast majority of the damage was caused by flooding due to the levees failing. As the storm stayed slightly west of New Orleans and travelled through lower density areas, this reduced the expected level of industry loss.

Over the weekend, Twelve Capital has received event modelling information from various modelling vendors. These first early indications point towards an insured loss of around USD 15-25bn for the insurance industry. As the event is still ongoing with flooding remaining a meaningful threat for the next couple of days, some caution with regards to these numbers is advised. Yet, should this turn out to be a correct estimate for this event, Twelve Capital does not expect any meaningful impacts to its ILS positions.

Also, it should be noted that even for the vast majority of aggregate Cat Bonds, there will still be between 70-80% of their buffer (attachment) left for the remainder of the 2021 hurricane season, which is almost half-way over, before these bonds would even start taking losses. As such, Twelve also does not anticipate any significant mark-to-market reactions, but remain vigilant as these assumptions are still subject to change.

Hurricane Nora

Also on the weekend, Hurricane Nora made landfall at the Mexican Pacific coast as a category 1 hurricane. Twelve Capital does not expect any impacts from this event on its ILS portfolios.

Upcoming Storms

As usual during this time of the year, tropical storm activity continues in the Atlantic. Tropical Storm Julian has formed in the middle of the ocean and is on its way to Greenland. Two other tropical depressions are expected to potentially form into storms as well, but current predictions have them as staying away from land for the time being.

Twelve Capital continues to closely monitor these events and will issue specific updates when more information becomes available.