Dear Investors
Several large wildfires have been burning in the Los Angeles area since January 7. The two largest, the “Palisades Fire” and the “Eaton Fire”, are still not fully contained and according to the latest reports published by CAL FIRE, around 14’300 structures have been damaged or destroyed. In the meantime, the CAT Bond market has reacted to the ongoing events and prices of around eight CAT Bonds have been marked down in particular. A brief look at some of the industry-index linked CAT Bonds shows that the CAT Bond market is currently implying a USD 30bn loss to the insurance industry. Overall, the impact of last week’s spread widening of the CAT Bond market and mark-downs on our fund’s NAVs was as follows (I USD Classes):
– Swiss Re Cat Bond Total Return Index: -0.27%
– Plenum CAT Bond Dynamic Fund: +0.05%
– Plenum CAT Bond Defensive Fund: -0.17%
– Plenum Insurance Capital Fund: -0.43%
Plenum Insurance Capital Fund and Plenum CAT Bond Defensive fund are holders of one of the affected CAT Bonds, Topanga Re, which is a CAT Bond that insures Farmers Insurance against losses exceeding around USD 2bn on a single event basis. With a market share in California of around 10% the market considers the bond to be exposed. After the most recent markdowns, the total exposure to this bond (in % of NAV) is as follows:
– Plenum Insurance Capital Fund: 0.59%
– Plenum CAT Bond Defensive Fund: 0.34%
– Plenum CAT Bond Dynamic Fund: 0%
We would like to highlight the following areas which could further change our assessment of the situation:
– Although the causes of both fires have yet to be determined, if faulty electric lines are found to be the source, subrogation claims may be pursued against the utilities responsible for the infrastructure
– The Fair Access to Insurance Requirements (FAIR) Plan foresees the participation of all licensed insurers based on their market share which may lead to additional losses
– The fire continues to be an ongoing event
We will inform you immediately should our assessment change.
Kind regards
Your Plenum-Team
Der Beitrag NewsFlash II: Wildfires Los Angeles erschien zuerst auf Plenum Investments.