Catastrophe bond indices continue to rise despite hurricane season forecast

by Artemis on August 23, 2010

The Swiss Re catastrophe bond indices, which provide us with a measure of the health and investor confidence in the catastrophe bond market, have just completed their sixth rising week in a row. Commentators are attributing this resurgence to the lack of active hurricanes so far this year in the Atlantic ocean and it seems investors, are getting over their initial nervousness (which we wrote about in our last cat bond index update).

First the Swiss Re Cat Bond Price Return Index, tracking the price return for all outstanding USD denominated cat bonds (which you can quote and chart through Bloomberg here). It has now been rising steadily since the 7th July and on the 20th August reached 95.27 which is its highest point since early June. The latest weekly calculation involved the biggest single weekly rise in 10 months.

Swiss Re Cat Bond Price Return Index

Swiss Re Cat Bond Price Return Index

Next the Swiss Re Cat Bond Total Return Index, tracking the total rate of return for all outstanding USD denominated cat bonds (which you can quote and chart through Bloomberg here). This index has continued its pattern of climbing, having risen consistently since the start of June, and remains at an all time high.

Swiss Re Cat Bond Total Return Index

Swiss Re Cat Bond Total Return Index

So much positivity to be seen in the catastrophe bond indices at the moment. That could of course all change should the hurricane season decide to intensify. Tropical Storm Danielle has now formed in the Atlantic and is currently Bermuda bound and predicted to reach severe hurricane status, Danielle should become a category 1 hurricane within the next 24 hours. It will only take one storm of that size to show any sign of heading for the U.S. coastline and we’ll probably see the indices drop.

We’ll keep you updated on the health of these indices as the hurricane season progresses.

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