Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

CATCo returns jump on U.S. wind seasonality


CATCo Investment Management have published their latest monthly insight for the CATCo Reinsurance Opportunities Fund. The report shows that as the risk period for US wind seasonality expires, significant returns can be generated from their portfolio, such as those demonstrated in August. We spoke with CATCo to better understand this.

As the U.S. hurricane season gets into full swing returns from investments exposed to U.S. hurricane risk tend to rise more over a concentrated time period given the historic frequency of wind activity over the last 40 years and the associated maturity of risk  periods generating premium income. CATCo’s report clearly demonstrates this in action.

For the month of August CATCo reports a return of 3.32% for their ordinary shares and a return of 3.46% for their Class C shares. This compares to less than 1% for both share classes during the month of July.

CATCo expect the same return to be generated in September, subject to no significant event occurring, and suggest that investors in their fund could see around a 10% return over a three month period during the Atlantic hurricane season.

Jason Bibb, Director and Chief Operating Officer of CATCo, commented; “We have composed a well diversified portfolio of CAT risk which, given the recent frequency of global catastrophic activity, has performed exceptionally well compared to our reinsurance peers, reinsurance/CAT Bond indices and has demonstrated its non-correlation with primary equity markets.” He added, “Our approach continues to yield consistent returns for our investors who sought a new and exciting alternative asset class in either of public traded equity or a private offshore investment.”

It’s easy to see from this how reinsurance linked investments are becoming increasingly attractive to institutional investors at the moment, with returns in the wider financial markets generally low and the added bonus of low to zero correlations with wider economic variables.

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