NewsFlash: Hurricane “Ian” makes landfall near Fort Myers (Florida)
Dear Investors
After Hurricane “Ian” was forecast to make landfall in the Tampa region yesterday, it changed its track southeastward and hit the Florida coast between Sarasota and Fort Myers in the late evening hours of September 28th, our time. Exact damage projections cannot be made at this time, as it is not yet clear what course the storm will take in the coming days and how quickly it will weaken. The insurance and reinsurance industry expects losses in several billions.
According to current forecasts, Ian will weaken substantially after landfall and continue towards the east coast of Florida and possibly across the Atlantic. The storm’s track and intensity are very similar to Hurricane “Charley” in 2004, and the remodelling of “Charley” resulted in only marginal losses on our funds of less than 0.5%. However, Ian differs from “Charley” in speed, its direction of movement (lan is slower) and its dimension (Ian has a larger wind field), which has an impact on loss intensity.
Hurricane risk in Florida is the largest market segment in the CAT bond market and we hold positions exposed to this risk in the Plenum Insurance Capital Fund, Plenum CAT Bond Fund and Plenum CAT Bond Dynamic Fund. Based on our internal modelling of the landfall scenario on Tampa, which was considered the most likely yesterday, the expected negative performance contribution was in the low single digits. The density of insured values in the Fort Myers region is slightly lower than in the Tampa region, but wind speeds were higher, so we expect slightly higher losses and a larger negative performance contribution on our portfolios under the currently expected scenario. The modelling for this scenario supports this assumption; the modelled losses are now in the mid to higher single digits.
The range of modelled results clearly shows the high degree of uncertainty is with regard to the loss expectation at the time an event occurs. CAT bond prices will reflect this high uncertainty of expected losses. We therefore expect noticeable price discounts on the potentially affected CAT Bonds. These do not yet reflect the actual loss that will occur and we have often seen in the past that initial price reactions were excessive and subsequently corrected.
We will inform you as soon as we receive more detailed information and forecasts.
Yours sincerely
Your Plenum Team
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