Twelve Capital Event Update – 6. September 2021

Hurricane Ida – Flooding

After Hurricane Ida made landfall in Louisiana on Sunday 29 August, it weakened from a category 4 hurricane down into a tropical storm as it travelled north-east across the United States and out into the Atlantic. As it traversed across the north-eastern United States it brought with it substantial amounts of rainfall, causing flooding across large parts of New Jersey, New York, and southern New England.

At present, the losses caused by the flooding are still uncertain and most modelling vendors have not provided estimates of insured losses so far. Many private insurance policies in the US do not cover inland flooding from rainfall and accordingly, most Cat Bonds should not be significantly exposed. However, there are also a few Cat Bonds sponsored by the National Flood Insurance Programme, which explicitly cover flood risk and which have been marked down by most brokers to reflect the ongoing uncertainty. Twelve Capital is underweight in these Cat Bonds and does not hold any of the most junior tranches across its portfolios. However, it would not be surprising to see some continued volatility in the prices of these bonds and some other bonds in the coming weeks until the loss situation has become clearer.

Hurricane Larry

Hurricane Larry is a category 3 storm currently in the middle of the Atlantic. Its projected path will take it ca. 300km east of Bermuda as it travels north and then curves to the east. Hurricane Larry is not predicted to make landfall in the United States, and it is estimated that there is only a possibility that it may make landfall in Newfoundland, Canada. Hence, Twelve Capital does not envisage any impact to ILS positions from this event.

Disturbance in the Gulf

There are a number of thunderstorms and showers in the southern part of the Gulf of Mexico; at present it is believed that these have a very low probability of forming a cyclone over the coming days.

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