Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Cat bond indices keep climbing as market recovery continues


It’s time for our monthly catch up on how cataastrophe bond price and total returns are doing on the Swiss Re published indices. Here’s our commentary from last month for comparison.

First the Swiss Re Cat Bond Price Return Index (available to quote and chart through Bloomberg here). Last  month it had just cleared 92 points on the index after a record single day where it grew by 1.4%. This month it sits above 94 points as growth has continued. We’re now at the highest point for the last year, and have experienced almost 14 weeks of gains, and as you can see in the three year chart below are steadily heading back to the high price returns seen a couple of years ago.

Swiss Re Cat Bond Price Return Index

Secondly, the Swiss Re Cat Bond Total Return Index (available to quote and chart through Bloomberg here) also shows a similar story of continuing growth and return to health. Now sitting above 186 points on the index it’s still at an all time high as you can see from the three year chart below.

Swiss Re Cat Bond Total Return Index

I’m expecting to see further growth from these indices over the next couple of months as interest in the cat bond market will increase. The pipeline of deals in progress, I hear, contains two transactions which should both make it to market within the next few weeks. That should help to spur interest further. There are also some deals which are due to mature by the end of the year, as these reach the end of their terms with no losses that is expected to raise investor interest even further. The market currently looks like a good place to launch new deals into.

That’s encouraging, and whether or not we see the $4b end of year figure (which is currently being quoted) it does bode well for next year and we should see a return to more normal market issuance conditions making new deals much easier to bring to market. That said, there is still further work to do on asset selection and swap counterparty terms before it becomes as easy to issue a cat bond as it was say 5 years ago.

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