Catastrophe bond indices climb strongly, total returns reach all time high

by Artemis on September 26, 2011

Another fortnight has passed since we last looked at the Swiss Re Cat Bond Performance Indices to assess how their performance had improved, or otherwise. The indices have both climbed strongly in the last two weeks and completely recovered all losses experienced as hurricane Irene approached. The price returns index remains significantly down on the start of the year after the drop caused by the Japanese earthquake and tsunami, however the total returns index has managed to reach an all time high point.

When we last looked at the indices they were both recovering from mark-to-market losses caused by the approach of hurricane Irene. The last fortnight has been quieter both in the market and in the Atlantic hurricane basin. No new cat bond issuances have come to light and no tropical storms have threatened the U.S. coastline. So, it’s encouraging to see that even during a quiet period the cat bond indices continue to climb strongly.

First we look at the Swiss Re Global Cat Bond Performance Price Return index, which tracks the price return for all outstanding USD denominated cat bonds (which you can quote and chart through Bloomberg here). This index has now recovered all of he losses caused by the approach of hurricane Irene and unless more storms threaten the U.S. it is likely to continue that upward trend for the forseeable future. It closed on the 23rd September at 94.62.

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 has climbed really strongly in the last fortnight and now sits at an all time high point. Again, this trend should continue unless storms threaten land or any other adverse news impacts the cat bond market. This index closed at 215.48 on the 23rd September.

Swiss Re Global Cat Bond Performance Total Return Index

Swiss Re Global Cat Bond Performance Total Return Index

If we come out the other side of the Atlantic hurricane season without a major loss this year it is expected that both indices will continue to rise and return to the highs seen pre-Tohoku. We’ll update you on their progress again in two weeks.

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