Typhoon Nanmadol loss likely to attach some reinsurance layers: Twelve

The eventual losses from typhoon Nanmadol in Japan is likely to be a significant event for Japanese primary insurers, Twelve Capital believes, while the investment manager also notes that some reinsurance layers are likely to trigger on the back of the storm.

In providing an update on typhoon Nanmadol after its landfall today, Twelve Capital, the insurance and reinsurance linked investments manager, reports that some higher-risk reinsurance arrangements are likely to be affected.

Twelve Capital forecasts an insurance industry loss in the billions of dollars, but does not at this stage believe that typhoon Nanmadol will have much impact on the ILS market or catastrophe bonds.

“Nanmadol will most likely cause insured losses totalling several billion USD, but exact figures have not yet been released by modelling agencies,” the investment manager explained.

Adding that, “In any case, we would expect this event to be significant for Japanese insurance carriers and for losses to be high enough to attach at least some higher risk reinsurance programs.”

So, these would likely be the very low-down layers of Japanese reinsurance programs in that case, at which levels any Japanese typhoon or flood exposed catastrophe bonds are likely to be considered safe, as these are relatively remote in terms of risk.

Twelve Capital further explained that, “As the event is still ongoing, it is not yet possible to reliably estimate the impact that this storm might have on ILS positions, but readers are reminded that Japanese windstorm risk is not a key geographical concentration for funds managed by Twelve Capital with total exposures typically being in the low single digit percentage area. Also, most Japanese Cat Bonds are quite loss remote and a triggering would require a major natural catastrophe.”

Finally, the investment manager also noted the event could qualify for some aggregate reinsurance arrangements.

“Attention also will need to be paid to aggregate structures and potential attachment erosion until the end of the season,” the update stated.