Twelve Capital Event Update – 14 October 2019

Typhoon Hagibis

Typhoon Hagibis made landfall around 12:00 MESZ on 12 October 2019 in Izu Peninsula, Japan.

Depending on sources the intensity at landfall was equivalent to a category 1 or a weak category 2 hurricane with sustained wind speeds of about 145 km/h up to 155km/h.

Hagibis caused severe flood and wind damage across various prefectures in the northeastern part of Japan before passing over the Pacific Ocean early Sunday morning. Transport and communication systems were highly impacted and large-scale power outages occurred following the typhoon. Tokyo Electric Power Company Holdings Inc. announced on Sunday that it expects power to be restored throughout the main affected areas over the next few hours. According to various Japanese Newspapers as at 9 p.m. on Sunday local time, the typhoon had claimed the lives of 34 people in 10 prefectures, with 17 people missing.

Known Damage

Unprecedented rainfall was experienced in many prefectures, causing levees to break, river defences to fail or dams to execute emergency discharges.

Amongst the worst hit prefectures, are Nagano and Fukushima prefectures, west and north of Tokyo, respectively, where the Chikuma River and Abukuma River burst their banks and caused severe flooding in residential and industrial areas including transport stations.

Initial assessment

At this stage, it is too early to determine reliable estimates for economic or insured losses.

Furthermore, Twelve Capital expects the ultimate assessment of the insured losses for this event to be a more complex and therefore more extended process than usual.

This veiw is primarily driven by Twelve Capital’s expectation that the major drivers for the insured losses for Typhoon Hagibis will be flood claims. Generally, these type of claims take more time to be reported and therefore ultimately reliably assessed than purely wind-driven losses.

Previous events however may provide some indication of possible loss ranges for the impact of Typhoon Hagibis on an insured market level.

Similar events in the past:
Typhoon Faxai

Faxai made landfall in September 2019 in a comparable location and with a comparable intensity to Hagibis, but with substantially less flood damage reported. It is estimated to have caused an insured market loss of USD 3- 9bn, depending on the different modelling agents.

Japan Floods in 2018

In 2018, the southern part of Japan was affected by severe rain-driven floods. More than 12’000 structures were reported as affected across 12 prefectures. According to AIR the insured loss of flood event in 2018 was estimated to be between USD 2-4bn. As at the end of 2018, Aon Benfield reported the insured loss to be USD 2.7bn. A comparison of the population density of the areas affected by the 2018 flood losses with the population density of the areas impacted by Typhoon Hagibis (assuming similar flood impacts), indicates that flood driven market losses (excluding the wind-driven impact) may end up in at least, the range of USD 3-5bn.

External sources:

This morning Bloomberg Intelligence indicated the Typhoon Hagibis insured loss range to be possibly within USD 5-10bn worth of insurance claims.

The above-mentioned figures are highly uncertain and have to be considered with caution. The ultimate assessment of insured losses for this event will be more complex and therefore are expected to require a more extended process than is usual.

The current level of information indicates limited impact (if any) on cat bond exposures and potentially, some performance impact including erosion of deductibles, to selected private collateralised retrocession contracts with exposure to Japan.

Twelve Capital will monitor the situation over the forthcoming days closely and issue a more detailed update with impact estimates once information and corresponding assessments are deemed more reliable.

Other recent events
Wildfires in California 2019

According to the California Fire Authority spokesman, Scott McLean “… September and October are the worst two months historically every year in California…”, however, the current exposure is only six fires covering an area of 61 km2, of which 56% is already contained. That compares with 2’047 km2 in 2017 and 3’545 km2 in 2018, which were two of the worst years in history with regards to insured wildfire losses.

So far, the wildfire affected area in 2019 is just a fraction of affected areas of the previous two years. On the other hand, with the “Saddleridge fire” being very close to the city of Los Angeles, there is potential for significant fire losses, should the fire push southward with the dry Santa Ana winds. As at today 42% of the “Saddleridge fire” exposed area is reported to be contained. Some of the 100’000 people evacuated over the last few days have been allowed to return home.

On this basis and unless the Saddleridge fire develops adversely, Twelve Capital does not see the potential for substantial insured losses for its portfolios.

Monday, 14 October 2019