Euler ILS Partners, formerly known as Credit Suisse Insurance-Linked Securities (CS ILS), is a global leader in insurance-linked strategies (ILS). Following a management buyout in October 2024, the team now operates independently, managing investments such as catastrophe bonds and collateralised reinsurance, which allow investors to share the risks of natual disasters, such as hurricanes, while helping insurers financially.
Tropical Storm Risk (TSR) has been a pioneer in seasonal hurricane forecasting since 1998. With high forecasting skill in the North Atlantic basin, TSR provides long-range predictions of the number and intensity of storms based on the Accumulated Cyclone Energy (ACE) ahead of the hurricane season, which spans June to December.
In preparation for the 2024 hurricane season, Euler ILS set out to challenge the scepticism around the accuracy of seasonal hurricane forecasts. Using over 20 years of observed and forecast ACE data from TSR, they compared static investment strategies with dynamic approaches that incorporated early July or early August seasonal hurricane forecasts.
The results were striking. Strategies using TSR’s July and August forecasts achieved up to 170% higher returns compared to those that ignored them, highlighting their transformative potential for investment strategies. The July forecast was particularly noteworthy, delivering critical insights just in time for the peak of reinsurance trading, which is typically concluded by early July. This timing allows investors to make informed decisions ahead of key market events, optimising returns and effectively managing risk.
TSR’s accurate ACE forecasts have become vital for managing risk in hurricane-prone regions. By pairing these forecasts with Euler ILS’s expertise, this new approach is transforming the ILS market. It helps clients lower risk, reduce volatility, and find new growth opportunities in an increasingly unpredictable environment.
TSR’s Atlantic seaonal forecast timeline begins with an extended range forecast in early December, followed by updates in early April, late May, early July, and early August. By mid-December, TSR publishes an end-of-season summary, verifying its forecasts against observations.