Aon Benfield Securities report on Q1 activity in the catastrophe bond and insurance-linked securities market (which we’ve written about earlier today here) also contains an update on the performance of their Aon Benfield ILS Indices. Aon launched the indices last August hoping to provide a quantitative monthly view of ILS returns which would help to benchmark the industry.
As we’d expect, given the impact to the other indices and returns from investment funds, the Aon Benfield ILS Indices have seen lower performance in the last quarter. Both the Aon Benfield All Bond and BB-rated Bond indices have posted negative returns, the impact of mark-to-market losses on Japanese earthquake exposed catastrophe bonds. The All Bond index returned -2.04% during Q1 compared to a positive 3.36% for the same quarter last year. The BB-rated index returned -3.21% for the quarter compared to a positive 3.48% the previous year.
Interestingly Aon Benfield also track two other indices, one made up of U.S. hurricane exposed cat bonds and the other U.S. earthquake exposed deals. These both saw positive gains during the first quarter however those returns were still negatively impacted by the disaster in Japan as they are well down on the same period of 2010. The U.S. Hurricane Bond index returned 0.89% compared to 3.23% the previous year. The U.S. Earthquake Bond index returned 1.21% compared with 2.09% in Q1 2010.
Aon Benfield say that they expect spreads, and as a result prices, to remain stable in the run up to hurricane season. They say that if there are no more major global catastrophes they expect the indices to perform strongly through the rest of 2011.