Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Cat bond funds continue recovery as hurricane Ian loss forecasts decline

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Catastrophe bond funds, as measured by the Plenum CAT Bond UCITS Fund Indices, have gained further ground in the last week of reported data, jumping more than one percent on average at the last available calculation point of November 4th.

These UCITS cat bond fund indices had declined by as much as -6.58%, on average, after major hurricane Ian impacted Florida.

But having clawed back some ground in the following weeks, these UCITS cat bond fund indices are now just -5.1% down over since the storm struck, thanks to recoveries in value as loss expectations have begun to trend more favourably for cat bond investors.

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.

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

The recovery has been steadily building after hurricane Ian, with signals due to some relatively significant recoveries in catastrophe bond prices in the secondary market and also a jump by the Swiss Re cat bond index.

We’re expecting a further recovery in this catastrophe bond fund index in a weeks time as well, given the news that early hurricane Ian loss estimates from some sponsors are proving more favourable than expected.

The average gain across these UCITS cat bond fund indices over the week to November 4th was 1.07%, with the low risk Index rising 0.78% and the high risk Index 1.16% (click the image below for an interactive version).

catastrophe-bond-fund-index-plenum-ucits

After this latest week of recovery, since hurricane Ian’s landfall, these cat bond fund indices are now -5.1% down on average, with the low risk Index now at -4.3% since Ian, while the high-risk cat bond fund Index is at -5.67% since Ian.

As we said, the recovery is likely to accelerate in reporting of this UCITS cat bond fund index, perhaps as soon as next week, as the reduced loss expectations for sponsors of cat bonds exposed to hurricane Ian flow through.

In particular, the estimate from FEMA of lower than expected NFIP claims from hurricane Ian should stimulate some further recovery for these cat bond indices, with perhaps another percent or more set to be gained.

It can take a little time for price changes to work through, as not all tracked cat bond fund managers incorporate pricing in the same manner, but ultimately the prices for many cat bonds exposed to Ian have made relatively significant recoveries, so this will raise these indices further in the coming weeks.

Analyse the UCITS catastrophe bond fund index here.

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