Hurricane Matthew – First Impressions

Tropical storm Matthew formed near St. Lucia in the Antilles on 28 September, moved west over the Caribbean Sea and intensified to a hurricane on 29 September. Matthew then turned north and crossed the western tip of Haiti and the eastern tip of Cuba as a category 4 hurricane. The interaction with these two islands lead to a slight weakening, making Matthew a category 3 hurricane when moving towards the Bahamas. Matthew intensified to category 4 again over the Bahamas but was back to category 3 before approaching and moving along the Florida coast. Matthew moved along the Florida coast, weakened to category 2 when moving along the Georgia coast and finally to category 1 while moving along the coast of South Carolina and North Carolina. Matthew did not make landfall in Florida or Georgia, just crossed a bit of the South Carolina coast between Charleston and Georgetown.

According to a preliminary wind field published by the National Hurricane Center of the US National Weather Service, only a small area over land was affected by hurricane force winds. The overall impact on losses is therefore expected to be limited.

The last modelling updates from the modelling agencies indicate that cat bonds are most likely not affected by hurricane Matthew. It will take a few weeks though until the final loss estimates are available by the cat bond sponsors. During this time period, we expect to see some mark to market price effects in the cat bond market. Based on currently available information, we expect a mark to market performance effect on our cat bond funds and mandates between

-0.5% and -2%.

We will closely analyse further updates from the modelling agencies as they become available and issue further client reporting.

Monday, 10 October 2016