Twelve Capital says private ILS exposure to Turkey quake “very limited”

Catastrophe bond, insurance-linked securities (ILS) and reinsurance investment manager Twelve Capital has said that its exposure to the earthquakes in Turkey through private ILS contracts appears “very limited”, with no impact expected to its products.

Southern Turkey was hit by a magnitude 7.8 earthquake early this morning, with numerous strong aftershocks felt and major property damage and loss of life reported.

A second major magnitude 7.5 earthquake was reported later today, that local scientific experts said deemed a separate event, rather than an aftershock and this has exacerbated the damage in some of the affected region.

More than 2,000 deaths and many thousands of injuries have been reported, with thousands of buildings reported to have collapsed.

In our earlier coverage of this quake event, we reported that some reinsurance market exposure is possible, with the Turkish Catastrophe Insurance Pool (the TCIP) program one possible source.

We also reported that there are some retrocessional catastrophe bonds with exposure, although this is anticipated to be unlikely to cause a performance hit at this time.

Now, ILS manager Twelve Capital has also commented on this Turkey earthquake event, saying that while it is “too early to tell the full extent of the damage” it does not currently anticipate any impact to its range of products.

“There is a minimal amount of Turkey exposure in the Cat Bond market in some global aggregate bonds, most of which had reset recently amounting to around 1% of the overall market size,” Twelve Capital explained on the catastrophe bond market exposure to quakes in Turkey.

Twelve Capital also invests in private ILS contracts, so collateralised reinsurance or retrocession, alongside its cat bond fund and strategies focused on insurance equities and bonds.

On the private ILS segment of the market, the ILS manager noted there is some exposure to Turkey quake risk in certain positions.

Saying, “Exposure in Private ILS contracts at Twelve Capital appears very limited.”

But adding that, “We do not expect any impact on Twelve Capital managed products, but due to the ongoing nature of this event we will keep monitoring the situation.”

It’s likely Turkish quake exposure in the private ILS market is also largely retrocessional in nature and likely in aggregate arrangements, as well as in certain reinsurer sponsored quota share sidecars.

Given the very wide extent of property damage seen after the earthquake’s in Turkey today, it could be some time before a clear picture of insured impacts and potential exposure is fully-understood.

But the amount of exposure in the ILS market overall is anticipated to be relatively limited, with traditional reinsurers more likely to face the bulk of any losses

Also read:

– Turkey hit by M7.8 earthquake. USGS gives 34% chance damages rise above $1bn.

– Turkey earthquake unlikely to impact cat bond performance: Plenum.