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The U.S. National Hurricane Center (NHC) has delivered its final tropical cyclone report for 2023’s hurricane Otis, putting the minimum central pressure of the storm at 922mb and 929mb at landfall on the Mexican coast, which we’re told still suggests the $125 million IBRD / FONDEN 2020 Class D tranche of catastrophe bond notes face around a 50% loss.
Recall that, hurricane Otis made landfall in the Acapulco area of Mexico’s Pacific coast as a Category 5 storm last October and based on the reported pressure from the NHC at the time, it appeared hurricane Otis would trigger the $125 million Pacific hurricane Class D tranche of the Mexican government’s IBRD / FONDEN 2020 catastrophe bond.
Investors have therefore been expecting a principal loss on the notes.
Investment manager Plenum Investments said at the time it believed there was a “high probability” that holders of the notes faced a 50% loss of notional, which would equate to a $62.5 million loss for the cat bond market.
Twelve Capital, an investment specialist in insurance and reinsurance that is linked to reinsurance, has highlighted the fact…
