Primary market activity remained moderate in terms of new issuances during October, however given our discussions with various syndicates, we expect this activity to pick up as we approach year end.
A new parametric Cat Bond was also analysed during the month, which offered investors exposure to storm surge risk in north-eastern states of the US. In terms of risk categorisation for this issuance, our models suggested that the bond could be triggered by relatively small losses to the insurance industry and also triggered by storms that would make landfall outside of north-eastern US states. Due to these observations and other qualitative factors, the bond’s price was considered to be insufficient given the assumed level of risk, and hence we declined the transaction.
Hurricane Patricia made landfall on the Mexican coast as a Category 5 storm. The storm had a substantial impact on Cat Bond MultiCat C. The bond is structured as a parametric transaction, attaching when the central pressure of a storm reaches levels lower than 932mb in a pre-defined area around the western coast of Mexico. The fund was not invested in MultiCat C.
30The fund continued to enhance its levels of diversification by increasing the portfolio’s allocation to non-peak perils such as Japanese risks.