Catastrophe bond indices stable but price returns continue slow decline

by Artemis on December 9, 2010

It’s time for another monthly update on the health of the Swiss Re catastrophe bond indices. Since our last update the catastrophe bond market has burst into a period of rapid issuance with deals such as Residential Re 2010, Mariah Re, Atlas VI Capital, Vitality Re, Lodestone Re, Kortis Capital and Successor X all officially marketing.

These new deals will help to put some risk capital back into the marketplace at a time when a large amount of cat bond capital is due to mature in just over six months. The deal pipeline looks busy too with rumours of another tranche from Mariah Re (so soon after the first), a new Montana Re issuance and a new Vega Capital deal all coming soon (we’ll bring you details on these transactions as and when we get them).

Now the Atlantic hurricane season is over the market has time to reflect on the year to date and adjustments in the indices are not uncommon. A decline in the price return index has continued, which has been reflected in recent deals which have achieved cheaper pricing, but we don’t believe this is any cause of concern (yet) and expect the index to recover next year.

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). The index remains at a five year high despite it’s continuing slow decline, the last close on December 3rd was at 97.86 points.

Swiss Re Cat Bond Price Return Index

Swiss Re Cat Bond Price Return Index

Next we look at 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 to rise and remains at a five year high, closing at 211.32 on December 3rd.

Swiss Re Cat Bond Total Return Index

Swiss Re Cat Bond Total Return Index

With a full pipeline and more deals likely to be renewed in the first quarter of 2011 we don’t expect any major changes in the indices in the coming months (major disasters aside). We’ll bring you another update next month.

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