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S&P: 15 cat bonds exposed to Matthew

Fifteen catastrophe bonds that provide protection from hurricanes to a variety of insurers could incur losses as a result of Hurricane Matthew.

That is the warning from S&P Global Ratings as the Category 4 hurricane moved towards Florida last night.

And Christopher Grimes, director in insurance at Fitch Ratings, said the storm would impact Florida homeowner insurers who have previously not had to deal with major hurricane losses.

“Hurricane Matthew will test Florida's previously untested homeowner specialist insurers if there are significantly sizeable losses,” he said.

“With heavy reliance on reinsurance in the Florida property insurance market, traditional and collateralised reinsurance and catastrophe bond markets could also see substantial losses.”

Hurricane Matthew has trekked through the Caribbean, where more than 100 deaths attributable to the storm have been reported in Haiti. It has also impacted Jamaica, Cuba, the Dominican Republic and the Bahamas.

In a statement on cat bonds, S&P Global Ratings said: “Currently, our ratings on these issues remain unchanged. We will continue to monitor developments and take appropriate action should it become clear that the likelihood of the bonds defaulting has increased.

“Typically, we will wait for updates from the issuer and calculation agent of each issuance to determine whether the hurricane was a triggering event.”

Until this year, no hurricane had made landfall in Florida since Hurricane Wilma in 2005.

Last month, Hurricane Hermine made landfall as a Category 1 hurricane in the Florida panhandle area, causing relatively modest insured losses.

Hurricane Matthew was producing sustained winds of 140 miles per hour last night, and was predicted to skim along Florida's east coast today, possibly passing directly over Cape Canaveral and Merritt Island.

AM Best has started to assess the potential financial impact the storm could have on the US property and casualty industry.

In a statement it said it did not anticipate taking a significant number of rating actions associated with the hurricane.

“As a vast majority of AM Best-rated entities possess broad business profiles with product and geographic diversification, they are also in a much stronger position to absorb this catastrophic loss than are dedicated Florida property writers,” it said.

“Nonetheless, AM Best-rated entities within the regions impacted will be evaluated relative to previous loss expectations and any material deviations could potentially lead to negative rating action in the form of under review modifiers, outlook revisions or rating downgrades.”

Major storm: the first outer bands of rain from Hurricane Matthew pass over downtown Orlando, Florida yesterday (Photograph by Joe Burbank/Orlando Sentinel via AP)

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Published October 07, 2016 at 9:00 am (Updated October 07, 2016 at 12:46 am)

S&P: 15 cat bonds exposed to Matthew

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