Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Catastrophe bond market total-return surpasses 14% YTD


The total-return of the catastrophe bond market is now above 14% for the first eight months of 2023, meaning that the cat bond market’s investment performance remains on-track to set new all-time records this year.

chart-investment-return-performanceThe very strong investment returns from the catastrophe bond market continue in the second-half of the year, with both July and August seeing the outstanding cat bond market deliver returns of close to 3% combined.

As we previously reported, the Swiss Re catastrophe bond Index, which is a widely used benchmark for the total returns delivered by outstanding cat bonds, had reached 10.34% by the end of June.

We now understand that this benchmark and some others the market uses, are now up more than 14% to the end of August.

Which continues the record pace of investment returns that are possible in the catastrophe bond market this year, one factor that has helped to drive increasing investor interest and appetite for the cat bond asset class, resulting in inflows of new capital to the sector.

The highest annual total return of the Swiss Re Global Cat Bond Index on record was 15.43% back in 2007.

At more than 14% after just eight months of the year, 2023 is now well on-track to beat that, absent any significant catastrophe loss threat occurring, it now seems.

All of which should further heighten investor awareness of catastrophe bonds and their attraction to investing in the cat bond asset class, for 2024 and beyond.

This should benefit cat bond funds as they look to raise new funds later this year, once the issuance pipeline reopens as expected in just a matter of weeks.

We’re being told the pipeline looks very busy, but there may be a question as to whether supply of new cat bonds will be sufficient to meet the still-growing investor demand for the asset class.

This may drive some cat bond fund managers to shutter access to their strategies later this year, but should also provide opportunities for additional ceding companies to enter the cat bond market for the first time as a sponsor later this year and in early 2024.

Cat bond returns continue to track at record levels, despite some softening of catastrophe bond spreads during the second quarter, which you can see evidence of in our charts displaying cat bond pricing and spreads, as well as cat bond multiples-at-market, by year and quarter.

Find all of Artemis’ catastrophe bond market charts and data here, or via the Artemis Dashboard.

All of our charts are updated as new catastrophe bond issues complete, and as older issuances mature.

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