HURRICANE IRMA TO TEST CATASTROPHE BOND MARKET- AM BEST

A new analysis by rating giant AM Best indicates approximately $12.5 billion of potential exposure to catastrophe bonds sponsored by Florida- domiciled insurers, Florida-only subsidiaries of major writers, reinsurers and national primary carriers now face Hurricane Irma losses.

The current catastrophe bond market exists primarily to provide reinsurance for catastrophic events such as Hurricane Irma. The recent growth of this segment has contributed to an abundance of reinsurance capacity over the past five years, but an active hurricane season could affect investors’ future appetite for this segment.

For catastrophe bonds to trigger, an insurer typically must first reach their own retention level and exhaust protection from private reinsurers and the Florida Hurricane Catastrophe Fund to the attachment level associated with each catastrophe bond.

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