From Artemis:
Hurricane Florence is now forecast to make a direct hit on the United States east coast in the Carolina’s late Thursday night into Friday, with the forecast path now taking a dangerous hurricane Florence ashore as a category 3 or 4 storm, with significant impacts possible.
Hurricane Florence surprised the weather forecast models last week, as it travelled further west at lower latitudes lining up the possibility of a U.S. east coast landfall, having originally been expected to curve north.
Now the scenario of an impactful loss event looks certain and the latest forecast from the National Hurricane Center will have insurance, reinsurance, catastrophe bond and insurance-linked securities (ILS) interests on their toes.
Hurricane Florence forecast track and path
Hurricane Florence is now a large hurricane, currently category 4 in strength with maximum sustained wind speeds of around 140 mph and higher gusts.
The NHC believes that Florence could reach Category 5 for a time, perhaps with 150 mph sustained winds, before weakening slightly and making a Category 4 (perhaps 3) when the eye comes ashore, landfall somewhere around the Wilmington area of North Carolina.
There is still time for the track to shift a little and as ever the landfall location will be key in determining the size of the eventual insurance, reinsurance and ILS market loss.
Hurricane force winds extend outwards up to 40 miles from the center of hurricane Florence, while tropical storm force winds extend outwards 150 miles.
Hurricane Florence continues to grow as it approaches the United States and with the storm passing through a light wind shear environment with sea surface temperatures near 29C, there isn’t much to prevent Florence from intensifying further as indicated by almost all of the guidance....
...That has significant ramifications for insurance and reinsurance interests, not just in the immediate wind damage and coastal storm surge flooding that can be expected with a high category hurricane landfall in that area.
But ramifications and eventual industry losses could be particularly significant, given some forecasts show hurricane Florence lingering in the region and passing slowly inland which could result in significant rainfall.
Just how impactful that turns out to be is uncertain at this time, there is some model disagreement for what happens after hurricane Florence comes ashore. But either way, whether Florence heads inland soaking the region, or curves out and lingers on the coast, the threat to lives, livelihoods and property is beginning to look severe....
***So that leads us to what is at risk.
A number of catastrophe bonds are particularly exposed, generally the higher layers of certain bonds providing U.S. wide coverage, or aggregate bonds with exposure in the region.
There are catastrophe bond layers in the ResidentialRe series sponsored by USAA that could be threatened if hurricane Florence makes a particularly impactful hit on a higher value area of the coastline, market sources said....MUCH MORE
Another bond highlighted has been Blue Halo Re, from Allianz, which being a novel term aggregate cat bond (meaning losses can accumulate across the term of the deal) is likely carrying aggregate deductible erosion from last year still.
It also may be worth watching cat bonds in the Kilimanjaro (from Everest Re) and Galileo or Galilei range from XL.
However, at this stage we’re told by sources that bid and offer spreads are wide in the secondary market and aside from some initial trading on less exposed names, not much is changing hands yet in the secondary cat bond market....
