The secondary market for catastrophe bonds and insurance-linked securities saw moderate trading activity during the month of October with some activity being sparked by the new cat bond issuances that came to market. Often when new deals launch investors adjust their portfolios to keep their diversification optimal and to allow them to take on some of the new cat bonds notes.
With two new transactions completing during October, specifically Calypso Capital from AXA which brought €180m of European windstorm risk to market and Queen Street IV Capital which provides Munich Re with $100m U.S. hurricane and Euro wind cover (details on both these transactions can be found in our Deal Directory), investors had opportunities to take on new cat bond notes. As a result the expected rebalancing of portfolios took place as some market participants adjusted their portfolios to accommodate the new deals, according to monthly insight from Plenum Investments, a Zurich based investment manager with a focus on the ILS asset class.
Plenum says that during October U.S. hurricane bond prices continued their upward price movement, gaining on average 1%, although at a slower rate than the previous month (they gained 2% in September). Cat bonds exposed to U.S. earthquake and European windstorm risks both remained flat during October.
Once again, the most significant price movements in the secondary market during October were for the Mariah Re cat bonds after the latest announcements of loss increases. Plenum says that they don’t expect significant further movement in the prices of Mariah Re cat bonds as most of the downside is already priced in.