Catastrophe bond indices remain at highs but have first weekly drop since July

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It’s been over a month since our last look at the Swiss Re catastrophe bond indices. Both indices remain at five year highs after strong rises have been the trend all summer. However we have seen the first drop in one of the indices since July.

Since our last look at the indices we’ve seen the upward trend continue, much of the reason for which has been the lack of landfalling hurricanes in the U.S. this year which has created an increased appetite for risk amongst investors.

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). This index remains at the 5 year high and has risen further since last month, however the rate it was rising at has slowed a lot to almost flat and in the past week it has actually registered a very small decline (0.02) to 98.07 on the 5th November. The reason for that decline in price is unclear, perhaps evidence of the more attractive pricing achieved by recent cat bond deals?

Swiss Re Cat Bond Price Return Index

Swiss Re Cat Bond Price Return Index

Next we have 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). As ever, this index continues to rise.

Swiss Re Cat Bond Total Return Index

Swiss Re Cat Bond Total Return Index

It will be interesting to see whether future issuances manage to complete with tighter pricing, like recent deals. That would help to keep cat bonds an attractive alternative to multi-year reinsurance programs.

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