Despite a fairly volatile month of trading in the secondary catastrophe bond market during August, market prices continue to reflect strong investor interest in the asset class according to investment manager Clariden Leu in their latest monthly fund managers report. They say that secondary cat bond trading was slow at the start of the month but hurricane Irene triggered a flurry of nervous trades as soon as she took aim for the U.S. coastline.
The secondary market for trading in cat bonds is a good indicator for the insurance-linked securities asset class as a whole. It can tell us whether any events threaten any outstanding cat bonds, whether supply is meeting demand or even outstripping it as happened in the early years of the market and whether investor interest is growing or waning in the ILS space.
Clariden Leu said of August that market prices continued to be reflective of the strong investor interest that the asset class is currently seeing and less reflective of the fact that the peak of the U.S. hurricane season is upon us. This suggests that prices are holding up against the seasonal price pressure that the hurricane season puts on cat bonds in the secondary market and that strong investor interest is helping to keep the market more buoyant than usual.
Clariden Leu saw month end pricing for August above the levels seen at the end of July and this has helped them to report positive performance of their cat bond funds in line with their expectations for August. They say that they took advantage of some of the pricing while Irene was approaching the U.S. to secure new positions at what they say were very attractive levels.
The Clariden Leu cat bond funds have been closed to new investors since May when they closed the funds to new subscriptions. They say that they will review this position towards the end of the year. With many predicting an active Q4 of primary cat bond issuance it’s likely that they will be able to gain additional capacity as that quarter progresses making it possible to let new investors into their funds.