Catastrophe bond indices show healthy gains in 2010

by Artemis on January 12, 2011

It’s time for our the first monthly update of 2011 on the health of the Swiss Re catastrophe bond indices. The last few weeks of 2010 were extremely busy in the cat bond market, with a number of deals completing (full details can be found in our catastrophe bond Deal Directory).

This has helped to bump up the capital available to investors and also provided a welcome source of diversification through the perils on offer to investors. The forecast for the market in 2011 looks good and we’re now all awaiting the first transaction of the year to come to market.

This year, we’ll be looking at the Swiss Re Global Cat Bond Performance Indices. These comprise a market value-weighted basket of natural catastrophe bonds tracked by Swiss Re Capital Markets, calculated on a weekly basis, essentially just an updated basket compared to the indices we tracked last month.

First, we look at the Swiss Re Global Cat Bond Performance Price Return index, tracking the price return for all outstanding USD denominated cat bonds (which you can quote and chart through Bloomberg here). Over the course of 2010 this index rose by 3.02%. In recent weeks it has actually softened slightly reflecting some of the increasing price competitiveness with reinsurance that catastrophe bonds are experiencing (as we mentioned here). This index last closed at 98.04 on the 7th January.

Swiss Re Global Cat Bond Performance Price Return Index

Swiss Re Global Cat Bond Performance Price Return Index

Next we look at the Swiss Re Global Cat Bond Performance Total Return index, tracking the total return of the basket of natural catastrophe bonds (which you can quote and chart through Bloomberg here). This index saw really good growth during 2010, demonstrating the amazing returns experienced by investors last year. Over the course of 2010 the return index rose by 11.11% (we believe the third highest return year on record?). It’s latest close was at 210.86 on the 7th January.

Swiss Re Global Cat Bond Performance Total Return Index

Swiss Re Global Cat Bond Performance Total Return Index

We’ll continue to update you on the performance of these indices, which act as a basic indicator of health and sentiment in the market, over the coming year.

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