Cat bond indices broadly stable with some seasonal movement

by Artemis on December 19, 2011

Another two weeks has passed and it’s time for another of our fortnightly looks at the Swiss Re Cat Bond Performance Indices to see how they have performed and what their movement can tell us about the mood and sentiment within the insurance-linked securities market. At this time of year the main thing to look out for is seasonal movements as the U.S. hurricane season is now over and the European windstorm season has just begun.

Like clockwork the indices appear to be in the midst of this seasonal flux in the last few weeks. The final impact of the Mariah Re tornado catastrophe bond losses has been priced in, U.S. hurricane bonds are seeing some seasonal movements as is to be expected now the season is over and European windstorm exposed cat bonds have seen some fluctuation in pricing.

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 seen another small decline over the last two weeks, some of which we believe is due to nervousness about the direction and intensity of a number of European windstorms which struck the UK (at one point it was thought a storm could have intensified and headed further south into France). As it turned out losses from these storms has been minimal. Also contributing to the decline is the seasonal price adjustments in all U.S. hurricane exposed bonds and all European windstorm exposed bonds which traditionally move in price at this time of year. This index closed on the 16th December at 93.96.

Swiss Re Global Cat Bond Performance Price Return Index

Swiss Re Global Cat Bond Performance Price Return Index

Next we turn to 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 risen slightly over the last fortnight and now sits at an all time high of 218.05 when it closed on the 16th December.

Swiss Re Global Cat Bond Performance Total Return Index

Swiss Re Global Cat Bond Performance Total Return Index

We will look at these indices again in the new year but we expect movement to be minimal unless there are any catastrophe events which threaten losses.

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