Hurricane Irma

By: Brian Spinelli, Chair of the Investment Committee

Hurricane Irma has strengthened to a strong Category 5 hurricane with maximum sustained winds of 185 mph.  Latest forecasts suggest if Irma makes landfall in the U.S. it will likely be a Category 4 or 5.  Based on forecasts this could hit the U.S. mainland on Sunday.  Leading hurricane forecasting firm Climate Forecast Application Network (CFAN) has created six hurricane track forecasts based on current conditions.  The average of the six tracks show the hurricane making landfall in southwestern Florida.  However, the other five tracks show quite a bit of uncertainty.  Two of which to do not make landfall at all.  The reinsurance funds we invest in will reflect the potential for loss in the fund’s daily pricing.  This is a daily occurrence and will reflect the best information available.  Last year we experienced this same process with Hurricane Matthew.  It ended up missing Florida resulting in the fund pricing recouping the estimated losses immediately.  We have no idea if Irma will play out the same way.  HH and our partner Stone Ridge fully understand the risk taken when investing in this area.  Like any investment, we are not disillusioned that these investments always go up.  When events like this occur, we have a predefined game plan to rebalance and recapitalize our position in these funds.  It is at these critical moments we are acting like a true reinsurer.  After a major insurance event, markets harden and premiums go up.  This is how insurance companies recoup their losses and get back into positive territory.  This area of the investment world does not allow investors to come and go as they please.  To earn the return premium and have this diversification in a traditional portfolio of stocks and bonds, we must be in the trade and stay committed to it.  We will continue to update you as material events transpire.