Akibare Re 2016-1 cat bond set for 100% loss of $200m principal

ORIGINAL PUBLICATION HERE

Mitsui Sumitomo Insurance has raised its estimate of losses from Japanese typhoons that struck in 2018, which has driven the qualifying aggregate loss amount under the terms of its $200 million catastrophe bond Akibare Re Ltd. (Series 2016-1) over the exhaustion point.

As a result, it’s now expected that the $200 million of Akibare Re 2016-1 cat bond notes will be marked down to close to zero on broker pricing sheets today, to reflect the new expectation that this will be a total loss of principal for the investors and funds holding this cat bond.

This catastrophe bond provides sponsoring insurer Mitsui Sumitomo with a source of collateralized annual aggregate reinsurance backed by the capital markets, covering certain losses from Japan typhoons including some flood risk as well as wind.

The main cause of the ongoing loss creep that has affected the value of the Akibare Re 2016-1 cat bond has of course been typhoon Jebi, which with insurance and reinsurance industry loss expectations now around $13 billion has driven a significant impact to Mitsui Sumitomo, as one of the largest domestic Japanese insurers.

ILW payouts on the cards after typhoon Jebi loss estimate rises

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Typhoon Jebi has already become the loss creep story of 2019 so far, but it’s set to become an even higher profile case as a rising industry loss estimate for the storm means it’s now expected that a number of industry loss warranty (ILW) contracts will payout.

We understand that one of the third-party catastrophe loss estimates used as a determining input source for ILW triggers covering Japan typhoon and Japanese all-natural-peril contracts has now been updated, setting up losses for some.

We’re told there is likely to be up to $100 million, perhaps a little more, of ILW capacity that may now payout on the increase of the typhoon Jebi loss estimate.

The estimate in question is the latest from Swiss Re’s sigma, which has now pegged Jebi’s insurance and reinsurance industry loss at $9.77 billion.

We’re told this will trigger payouts of any Japan typhoon ILW’s that attach at a $7.5 billion Japan typhoon industry loss, of which we’re told there are a handful, perhaps as much as the $100 million of limit mentioned above.

ILW triggers on watch for typhoon Jebi, hurricane Michael & wildfire losses

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The industry loss warranty (ILW) market is waiting nervously for confirmed estimates of industry losses to emerge for a number of recent catastrophe events around the globe, with certain trigger points on-watch and further ILW losses possible in the coming weeks.

The ILW market, which largely provides retrocessional forms of reinsurance that trigger and payout based on estimates of industry impacts from catastrophes, has faced its share of losses ever since the major hurricanes struck in 2017.

Loss creep from hurricane Irma also delivered a blow to some ILW providers, tipping a few more positions into loss and now the ILW capacity backers are nervously watching a few specific trigger points for further losses in weeks to come.

Jebi officially the largest Japan typhoon insured loss ever

ORIGINAL PUBLICATION HERE

Typhoon Jebi has now officially become the largest Japan typhoon related insurance and reinsurance market loss on record, as the amount of insured claims paid for the storm have now reached almost $5.2 billion.

The latest data from the General Insurance Association of Japan (GIAJ) shows that typhoon Jebi has now resulted in a massive 825,091 accepted insurance claims, 108,928 from automobiles, 694,310 from property fire insurance policies and 21,853 from other miscellaneous lines of business.