The first pure wildfire exposed catastrophe bond has come to market, as California focused electrical utility PG&E Corporation (the Pacific Gas and Electric Company) turns to the capital markets and ILS investors as a source of collateralised insurance protection with a $200m Cal Phoenix Re Ltd. (Series 2018-1) transaction. Rather than using a parametric trigger the risk is being ceded via Energy Insurance Mutual (of which PG&E is a member) as the insured and reinsurance firm Tokio Millennium Re AG.
Insurers and reinsurers sponsored approximately $7.4 billion in catastrophe bonds in the first half of 2018, down modestly from last year’s astounding first-half total of $8.8 billion, according to the PCS H1 2018 Catastrophe Bond Report. Sponsors completed 24 transactions—down a bit from last year’s 29 but still far higher than the 14 seen in the first half of 2016. Average transaction size, at $309m, was steady year over year.
Aberdeen Asset Management has increased its stake in the Catco Reinsurance Opportunities Fund from 7.26 percent to 9.83 percent, according to a London Stock Exchange listing. Aberdeen now has 938,034,293 shares in the fund following the transaction completed on 9 July. Markel Catco said in May that material loss creep on Hurricane Irma claims were to blame for a major hike in reserves on the back of the manager's 2017 losses.
New York-based multi-line insurer Kingstone boosted its catastrophe reinsurance coverage by 41% to $445m at the 1 July 2018 mid-year renewals, citing a "desire to maintain coverage in excess of that needed to cover a 1 in 250 year event". "Reinsurance markets continue to be favourable ... and we were able to achieve improved terms and pricing," said Kingstone president Dale Thatcher.
Conventional hurricane events that do not assume super-cat characteristics are typically captured adequately by vendor catastrophe models, according to research by JLT Re. The models, however, have not performed as well for hurricane events where losses extend beyond wind into areas that are not modelled or well understood. Josh Darr, lead meteorologist, JLT Re, said, “These [complex] events often bring unforeseen consequences that cause losses to spiral."
The first half of 2018 has seen the lowest losses from natural disasters across the world since 2005, with natural catastrophes causing $33 billion of losses, of which around $17 billion were insured, according to Munich Re. The costliest event was winter storm Friederike in Europe, which caused losses of €2.2 billion ($2.7 billion), of which €1.7 billion ($2.1 billion) was insured.
Meanwhile, Aon Benfield's Impact Forecasting has revealed that eight periods of severe thunderstorms led to widespread convective storm and flash flood damage across the eastern two-thirds of the US during the month of June. Total combined economic losses from all the events were anticipated to approach $4 billion, with insurers expected to cover more than $3 billion of the economic cost.
Posted: Monday, July 16th, 2018