Hurricane Milton estimated a 0% – 4% principal loss to the cat bond market: Twelve Capital

Analysis undertaken by specialist investment manager Twelve Capital suggests an insurance industry loss in the range of $20 billion to $50 billion from hurricane Milton, with a 0% to 4% principal loss possible for the catastrophe bond market.

The analysis closely matches with information we have been publishing, so provides another data-point that suggests the sub-$50 billion insurance and reinsurance market loss is increasingly looking likely.

But Twelve Capital also notes the potential for significant uninsured losses with hurricane Milton, as well as certain areas of potential catastrophe bond pressure.

The investment manager said, “Analysis from Twelve Capital, and initial market estimates, peg industry losses in the USD 20 – 50bn range, with potential for material uninsured losses.

“One area of uncertainty on this will be the losses to the US National Flood Insurance Program (NFIP) sponsored Cat Bonds, which are already under pressure on the back on Hurricane Helene which was a heavy rainfall event.”

Uncertainty over the NFIP FloodSmart Re catastrophe bonds is likely to persist for a while, as the FEMA Program’s flood insurance claims can take time to come in and be counted.

Twelve Capital went on to say, “Current analysis estimates there to be a 0% – 4% principal loss to the Cat Bond Market.”

Then, highlighting some specific areas of uncertainty, the investment manager explained, “In the coming weeks there is likely to be price fluctuation, especially on bonds heavily exposed to the Tampa Region and with coastal policies.

“We are monitoring the NFIP bonds that cover hurricane induced flooding, however it is too early to tell the exact impact, but Tampa is a key exposure zone for the NFIP.”

Finally, Twelve Capital also commented on how the catastrophe bond market might behave over the coming weeks, as the impacts and any losses from hurricane Milton are digested.

“There is also the potential to see spread widening across many Cat Bonds as prior to Milton, the market had priced in rate softening for the upcoming renewals, which is now less certain given the pressure Milton may apply to the reinsurance market,” Twelve Capital reported.

So, as the week Milton made landfall draws to a close, the industry impacts are still thought to be sub-$50 billion (some of our sources are still suggesting $20bn to $40bn as a possible tighter range to look towards), while the catastrophe bond market impact is expected to be relatively small (in the scope of the market). Greater clarity may emerge next week.

Also read:

– Cat bond market drawdown expected, yields likely to rise after Milton: Elementum’s Davis.
– Hurricane Milton loss $30bn – $50bn. Substantial ILS impact not expected: Euler ILS Partners.
– Mutual cat bond and ILS funds recover ground as hurricane Milton impact clearer.
– Milton loss below $50bn may not be sufficient to move pricing: Jefferies.
– Milton could drive property catastrophe reinsurance rates up at 1/1 2025: KBW.
– Most mutual cat bond & ILS funds slid a little further on Milton’s final approach.
– Cat bond funds can still finish the year positively: Twelve Capital’s Wrosch.
– Hurricane Milton losses likely below a 5% cat bond market impact: Icosa Investments.
– Hurricane Milton: Pre-landfall broker loss estimates ranged $15bn to $40bn.
– Hurricane Milton Cat 3 landfall in Sarasota. Worst case Tampa loss scenarios avoided.
– Hurricane Milton: Insurance, reinsurance, cat bonds, ILS ready to respond.
– Some mutual cat bond and ILS fund NAVs fall further on hurricane Milton threat.
– Hurricane Milton industry loss at $25bn+ changes pricing narrative: Goldman Sachs.
– Hurricane Milton cat bond loss potential still in wide range: Icosa Investments.
– Hurricane Milton seen denting cat bond market -1.4% (excl. surge): Plenum.
– 33% chance hurricane Milton loss above $50bn. Would drive hard market: Euler ILS Partners.
– Hurricane Milton Cat 5 again. Tracks slightly south. Uncertainty still high, loss range wide.
– Safe to say hurricane Milton likely a $20bn+ insurance market event: Siffert, BMS.
– Hurricane wind speeds forecast across entire Florida Peninsula as Milton approaches.
– Mexico’s catastrophe bond presumed safe from hurricane Milton.
– Stone Ridge leads managers cutting mutual cat bond or ILS fund NAVs on hurricane Milton.
– Hurricane Milton could be a huge test for the entire (re)insurance market: Evercore ISI.
– Hurricane Milton losses could amount to tens of billions, but uncertainty high: BMS’ Siffert.
– As hurricane Milton intensifies, Mexico’s catastrophe bond comes into focus.
– Material hurricane Milton losses could change 2025 property reinsurance price trajectory: KBW.
– Cat bond & ILS managers explore options to free cash, as hurricane Milton approaches.
– Hurricane Milton: First Tampa Bay storm surge indications 8 to 12 feet.
– Hurricane Milton is biggest potential ILS market threat since Ian in 2022: Steiger, Icosa.
– Hurricane Milton forecast for costly Florida landfall. Cat bond & ILS market on watch.