Hurricane Irene approaches New York | FT Alphaville

Hurricane Irene approaches New York

Preparations for Hurricane Irene have been ramped up on Friday as the mean meteorological forecasts continue to place New York and the surrounding area near the eye of the storm:

The above image, which you can click to enlarge, is from the Artemis blog and shows the estimated location of the hurricane (radar symbol) at about 11am New York time, Sunday. The paths forecast by organisations that do that sort of thing, such as the National Hurricane Center and the US Navy, are the vivid coloured lines.

New Yorkers can get the latest info on evacuation plans from the Mayor’s website. Trading floors are still set to open on Monday, though that may change if the MTA transport system is still closed; it’s being shut down at noon New York time on Saturday.

This fear has led to a bit of stress in short-term markets, as traders try and lock in cash over the start of next week. Reuters reports:

NEW YORK, Aug 26 (Reuters) – Wall Street scrambled to raise cash on Friday on fears that a hurricane could wreak havoc on trading and the commute of thousands of traders who live in the U.S. Northeast early next week.

In the repurchase market, which is a key source of short-term cash for Wall Street to fund trading and operations,some traders sought to lock funds through Tuesday.

This drove the interest rates on loans backed by Treasury bonds through Monday higher by several basis points from late Thursday to as high as 0.10 percent.

“Some traders expect that there are going to be some people on their desk that won’t be able to make it in,” said Scott Skyrm, head of repo trading at Newedge in New York.

Estimates of Irene’s impact on supply chains, retail sales and insurance costs and so on are coming in. We’re not sure how useful these are yet. We do know that Caribbean losses from Irene may have already reached $1bn, according to AIR worldwide.

And we’d make the Gods of finance blogs very unhappy if we didn’t at least mention catastrophe bonds.

Here’s more from the folks at Artemis:

The eventual size of the losses from hurricane Irene are very difficult to predict. Should Irene travel directly over any major U.S. northeast city the losses could be very large. Reinsurance broker Willis Re pointed out that even if Irene failed to make landfall and just travelled north along the coastline, the losses could still be significant from storm surge and flooding from the many inches of rain expected to fall.

The catastrophe bond market are certainly keeping a close eye on hurricane Irene now that the uncertainty in her path is becoming less exaggerated. The North Carolina catastrophe bonds issued by Johnston Re Ltd. are both certainly at risk putting $506m of investor capital at risk. The Massachusetts cat bond Shore Re Ltd. adds another $96m to the at risk cat bond capital. There are other cat bonds with exposure to U.S. east and northeast coast hurricanes (including Loma Re Ltd., some of the Residential Reinsurance Ltd. transactions, Longpoint Re Ltd. and perhaps some of the Successor bonds). Many catastrophe bonds have coverage for some U.S. hurricane risks along much of the eastern seaboard states. Some press reports show just four cat bonds with risk from hurricane Irene, we belive there are more with potential exposure depending on the location of landfall and resulting windspeeds and insured losses. All outstanding catastrophe bonds are listed in our Deal Directory.

But most importantly… stay safe everyone!

Related links:
Irene from space: diameter is one-third of Atlantic coastline – New Scientist
Hurricane Irene batters Bahamas, takes aim at U.S. coast – Artemis
The economics of US hurricanes – NBER
MIT: “New York Surge From Irene Looks Bad, But Not Off Charts” – Climateer Investing