Update following Hurricane Milton from Securis Investment Partners

Hurricane Milton made landfall close to Sarasota, Florida around 15 miles south of the entrance to Tampa Bay, on Wednesday evening as a mid-category 3 storm. Milton initially formed in the Gulf of Mexico on 5 October as a tropical storm before rapidly intensifying to major hurricane and third major hurricane of the 2024 Atlantic hurricane season.

Moody’s RMS Hwind’s estimated the force winds extended almost 70 miles, from St Peterburg to Boca Grande. Hwind interesting showed maximum sustained winds of 106mph, suggesting greater weakening prior to landfall than the NHC estimate. For comparison, during the Hurricane Helen landfall, hurricane force winds extended 150 miles along the coast between the Apalachicola National Forest and Cedar Key, and during Hurricane Ian in 2002, hurricane force winds extended over 100 miles between Sarasota and Naples.

The associated storm surge from Milton has been less than originally feared. The Portfolio Managers are awaiting further information to get a clearer view of the magnitude of the coastal surge damage.

Milton is currently located off the coast of Florida having passed over Cape Canaveral as a category 1 storm. The NHC is reporting maximum sustained winds of 85mph (still a category 1 storm). Milton is expected to move north eastwards.

Industry losses estimated they have received so far are noticeably lower than those they received for Hurricane Ian in 2022 which were in excess of $50bn.

Based on currently available information and key assumptions inclusive positive carry, no further cat events in the month of October, and not factoring in negative mark-to-market impacts for cat bonds in the portfolio, the Portfolio Managers are still expecting a positive return for the month.

Every loss depletes the risk-bearing capital from the market and diminishes reinsurance capacity, leading to a typical increase in premiums following significant events.

The magnitude of this increase hinges on several factors, including the final claims, making it challenging to predict. However, it is likely that risk premiums in the CAT bond market will rise once more, despite already being at an unprecedented high.

We believe this scenario may present opportunities as the hurricane season nears its end.