Twelve Capital Event Update – 21 October 2019

21 October 2019

Update Typhoon Hagibis

Typhoon Hagibis made landfall on 12 October 2019 in Izu Peninsula, Japan, equivalent to a category 1 or a weak category 2 hurricane with sustained wind speeds of about 145km/h up to 155km/h.

Hagibis caused severe flood and wind damage across various prefectures in the North-Eastern part of Japan. One of the most affected prefectures was Nagano.

According to 7pm updates from NHK online Japanese Newspapers as at 20 October 2019, it is known that 80 people died with 17 people still missing. Levees at 135 different locations on 71 rivers across seven prefectures collapsed. According to NHK more than 52’400 homes were flooded and more than 4’100 houses were destroyed or partially damaged.

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. The modelled losses at that time were USD 2-4bn. As at the end of 2018, Aon Benfield reported the insured loss to be USD 2.7bn.

The figures mentioned above may indicate that Typhoon Hagibis flood driven market losses (excluding the wind-driven impact) may end up in the double-digit billion range. However, it should be noted that the final pay-out of flood claims will be dependent upon the underlying exposure affected and with that firm estimates are more difficult to quantify. Generally, the pay-outs are typically stepped according to the level of water damage sustained and limited by the so-called “sub-ordinary” policy limits, which represent a fraction of the total sum insured of the subject structures affected.

Twelve Capital reiterates that at this stage, it is too early to determine reliable estimates for economic or insured losses. None of the major modelling companies have yet released any market loss indications (although anticipated to do so this upcoming week), in line with the firm’s expectation that the ultimate assessment of the insured losses for this event may be a more extended process than usual.

The above-mentioned figures remain highly uncertain and have to be viewed with caution.

Given the current level of information, Twelve Capital expects no impact on Cat Bond exposures. However, there may be some potential performance impact and certainly erosion of deductibles to selected private collateralised retrocession contracts with exposure to Japan.

Update “Saddleridge wildfire” in California

According to the California Fire authority, 80% of the “Saddleridge fire” is contained. All evacuation orders are now lifted. Latest reports indicate that 31 structures have been damaged. On this basis, Twelve Capital does not see the potential for substantial insured losses or any impact on its ILS portfolios.

Other recent eventsTropical Storm Nestor has made landfall in Florida as a Tropical storm in the panhandle of Florida on 19 October 2019 with winds of up 96km/h. Local tornadoes were reported with some homes and businesses damaged across the state. No major impact on the insurance market and ILS portfolios expected.

Monday, 21 October 2019