Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Catastrophe bonds demonstrate resilient returns


More positive news in the global financial press today for catastrophe bonds as Bloomberg (here on the SF Gate website) discusses the returns the market has offered since the earthquake in Japan struck and dented the markets confidence. They compare the returns of an index of cat bonds with the returns of other assets and it’s clear that as non-correlated assets go, cat bonds offer some of the best returns around.

Since the 1st April, after the catastrophe bond returns fell 4% following the earthquake in Japan, the Swiss Re Global Cat Bond Total Return Index shows that cat bonds have returned more than 5.3% as they recovered. The Bloomberg article says that this is more than the 3% return on Bank of America Merrill Lynch’s Global Broad Market Corporate Index.

They say that the gains in the market may encourage re/insurers to issue more of the securities. A spokesperson from Swiss Re highlights that issuance conditions are favourable moving into the end of the year and Q1 of 2012 and that the increases seen since the disaster demonstrate the investors commitment to the asset class.

Given the financial crisis around the globe and the poor returns being seen in almost all investment classes, insurance-linked securities and other reinsurance-linked investments are proving their attraction (but still failing to meet demand).

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