Cat bond fund index falls again, now -6.04% down on avg since Ian

Catastrophe bond funds, as measured by the Plenum CAT Bond UCITS Fund Indices have fallen further in the wake of hurricane Ian at the last index calculation, with the average decline since the storm made landfall now -6.04% across the indices.

These catastrophe bond fund indices, calculated by specialist insurance-linked securities (ILS) investment manager Plenum Investments AG, offer a valuable source of real cat bond fund return information, focused on the UCITS cat bond fund category, with 14 live cat bond funds currently tracked.

As a result, this cat bond fund index provides a broad benchmark for the actual performance of cat bond investment strategies, across the risk-return spectrum.

As we explained last week, these UCITS cat bond fund indices suffered their biggest declines in history due to the expected market impacts of hurricane Ian.

The underlying basket of 14 UCITS cat bond funds actually experienced a performance spread of -1.5% to -9% before the index was calculated for September 30th.

Which aligned with our analysis published on October 4th that stated cat bond fund losses from Ian ranged from low to high single digits.

At that calculation date, the cat bond fund index saw an average decline of just over -5%, the biggest single decline in their history.

Now, we have the latest data for October 7th and the cat bond fund indices have fallen further, with the average decline across the cat bond indices since before hurricane Ian struck, increasing to -6.04%.

You can see the Plenum UCITS Catastrophe Bond Index – Live Indices below (click the image for an interactive version):

For a better visualisation of the impact hurricane Ian has had on the catastrophe bond fund market, including this latest weekly decline, our historical indices that track UCITS cat bond fund performance back to 2011, provide a clearer view (click the image for the interactive version):

At their latest calculation on October 7th 2022, the two Plenum CAT Bond UCITS Fund Indices that we have full historical data for, the Master Average and Master Capital, had each fallen by a further -1.24% and -0.66% respectively.

By risk-level, the Low Risk Average cat bond fund index fell another -0.26% and the High Risk Average by another -1.85%.

Since hurricane Ian impacted Florida, the Master Average cat bond fund index is now down -6.07% and the Master Capital index is down -6.41%.

On a risk-level basis, the Low Risk Average cat bond fund index is down -4.86% and the High Risk Average cat bond fund index has fallen -6.82%.

The additional fall in the last week of available data for this cat bond fund index is no real surprise, as pricing sheets did continue to mark down some positions, while more broadly the prices of many cat bonds which aren’t exposed to hurricane Ian have now fallen as well.

As we explained yesterday, the decline in catastrophe bond prices for those names not exposed to hurricane Ian does imply a very hard market is coming, as pricing sheets are factoring in rising yields for new issuances.

It also implies that some of the decline in cat bond valuations may be recovered, as losses from hurricane Ian become clearer in the coming weeks.

We’ll continue to update you as more data to support insights into the insurance-linked securities (ILS) market loss from hurricane Ian become available.

Analyse these UCITS catastrophe bond fund indices here.

Read all of our coverage of hurricane Ian, and our analysis on the potential market losses, here.