Twelve Capital Event Update – 23. September 2019

Das aktuelle Event Update ist in englischer Sprache verfügbar:

Hurricane Dorian

Given current industry loss estimates, Twelve Capital’s expectation remains that this event will have only a marginal impact on ILS portfolios, if any. Currently, the total insured market loss estimates for Hurricane Dorian across the Bahamas, US and Canada vary from roughly USD 3bn on the lower end up to USD 10bn at the high end. The driver of these estimated losses remains the impact on the Bahamas where various sources indicate that the economic damage and social impact is significant.

Typhoon Faxai

Typhoon Faxai, which made landfall 8/9 September just east of Tokyo, caused sustained winds, power outages and transport disruption as well as infrastructure damage. Insured losses were estimated to be somewhere between USD 3bn and USD 7bn by major modelling companies last week. Furthermore, last week, two of the three major insurance companies (with roughly 30% market share in non-life Japanese domestic insurance, by net premiums written) published their initial loss estimates. These were in the range of USD 1bn for each company. Grossing up these estimates to a total insured market loss would indicate that Typhoon Faxai is currently expected to have caused an insured market loss of USD 3bn to USD 4bn, i.e. roughly in line with the modelled loss estimates.

Given the loss development history experienced with Typhoon Jebi in 2018, Twelve Capital still considers that these initial estimated losses should be treated with corresponding caution. Twelve Capital is in touch with parties to try to establish how Typhoon Faxai might resemble Typhoon Jebi from a meteorological perspective (e.g. wind field symmetry and peak wind gusts at landfall) as well as from a modelled impact perspective. With that in mind, Twelve Capital is expecting further validation of initial loss estimates of Typhoon Faxai and evaluation as to whether these initial loss estimates could experience a similar level of development as the market experienced with Typhoon Jebi.

The major exposure in Twelve Capital’s ILS portfolios to this type of event stems from collateralised reinsurance instruments in Private ILS transactions. At the level of the market loss indicated above, Twelve Capital does not expect any significant impact on ILS portfolios from this single event. In combination with the impact of Hurricane Dorian, however, the partial erosion of some underlying protection could be expected.

Twelve Capital continues to closely monitor the evolution and impact updates of the two events outlined above and will issue updates as more reliable estimates about insured losses and combined estimated impacts become available.

Tropical Storm Imelda

Tropical Storm Imelda quickly developed and made landfall along the coast of Texas on September 17, before slowly moving inland bringing torrential rains across the state. At least one person was killed. Imelda made landfall as a 65 km/h storm near Freeport, Texas, later bringing more flooding rains to the state, especially near Houston in the greater Beaumont region. Total economic losses were expected to be in the hundreds of millions of US dollars. Most Imelda-related damage was due to flooding so a lower-than-normal portion of the economic cost will be covered by private insurance market. No significant impact on Twelve ILS portfolios is expected from this event.

Flooding in Spain

Torrential rain in mid-September resulted in major flooding in south-eastern and central Spain. This was due to a cut-off low pressure area, which led to up to 370mm of rain falling between September 11 and 15. The floods claimed seven lives and the insured losses for these floods are expected to exceed EUR287m (USD 318m) alone. Preliminary estimates of total economic losses indicate that the final bill may well exceed EUR 1.66bn (USD1.83bn). The worst-affected areas were the autonomous regions of Valencia, Murcia, and Andalusia.

Other ongoing events

There are a number of storms that are developing at the time of publication.

Atlantic

There are three active systems, including two tropical storms, Tropical Storm Jerry and Tropical Storm Karen, as well as a tropical system ‘Invest 13’ which will be named Lorenzo, the latter emerging this morning from the west coast of Africa. There is no imminent threat of landfall over the next 3 to 5 days expected from these systems. Jerry is expected to curve away from the US coast, while Karen is expected to travel north from the Caribbean towards Bermuda. Invest 13 has only just emerged so any forecasts are relatively uncertain, however, initial indications show a gradual strengthening to a strong hurricane and a corresponding curving path away from the US mainland. Twelve Capital will continue to monitor these developing events.

East Pacific

Three active systems are also present in this area. Tropical Storm Kiko is moving away from the US west coast towards Hawaii in a ‘zigzag’ manner. It is currently a tropical storm and is expected to become weaker; there is no imminent threat to land. Meanwhile, Tropical Depression Lorena made landfall over the weekend on the western Coast of Mexico. A tropical depression is the weakest form of tropical cyclone, so no major impact is expected for the insurance industry. Economic damage will be driven by heavy rainfall and flash floods. Tropical Depression Mario is expected to make landfall in Baja California over the next 24 to 48 hours. Twelve Capital does not expect any major damage here either in terms of insured losses.

West Pacific

Tapah is curving between Korea and Japan as a tropical storm and is expected to make landfall in the northern tip of Japan over the next 24 to 48 hours. This event is being monitored. No major damage is expected if the storm’s strength remains at tropical storm level.

Earthquake in Albania

An earthquake of 5.6 magnitude with an only slightly weaker aftershock shook the Albanian port of Durres on Saturday and also the capital Tirana. The country’s Ministry of Defence declared this to be the most powerful earthquake experienced in Albania in 30 years. Although a number of buildings were damaged, there was no impact expected on portfolios managed by Twelve Capital.

Montag, 23. September 2019