Hurricane Otis made landfall near Acapulco, Mexico early Wednesday morning (October 25, 2023) as a category 5 storm. This is a dangerous situation for the region of Acapulco as destructive winds, flooding and mudslides can be expected. There has never been a hurricane of this intensity in this part of Mexico in the past. Moreover, what sets this hurricane apart is its rapid intensification in the last 24 hours. Indeed, hurricane Otis formed only 3 days ago, on October 22 2023, in the Eastern Pacific, close from Mexico. The storm then remained a low intensity storm (tropical storm) for the following 2 days. Only 12 hours before landfall the storm began to intensify at a very rapid rate. Within 12 hours, the storm intensified from a tropical storm into a category 5 storm, which represents the fastest intensification of a hurricane in Eastern Pacific history (according to Chicago State University).
The CAT Bond market has one bond exposed to hurricanes in the Pacific coast of Mexico, namely the CAT Bond IBRD 128 D. This bond, was issued by the International Bank of Development and Reconstruction in February 2020 and has a nominal amount of $125mm with a parametric trigger structure based on the central pressure of the storm. Based on the latest central pressure information of the storm, we expected with a high probability that the bond will experience a 50% loss to the notional due to Hurricane Otis. This should only have a minor impact on our CAT bond funds:
- Plenum CAT Bond Fund: 0%
- Plenum Insurance Capital Fund: 0.13%
- Plenum CAT Bond Dynamic Fund: 0.23%
We will inform you immediately if our assessment changes.
Kind regards
Your Plenum-Team
Der Beitrag NewsFlash: Hurricane Otis (Mexico) – Category 5 erschien zuerst auf Plenum Investments.