Swiss Re Insurance-Linked Fund Management

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Credit Suisse offloads cat bonds, takes advantage of better priced ILW’s


Investment manager Credit Suisse has continued to offload positions in certain catastrophe bonds on the secondary market to take advantage of mark-to-market price gains during the month of June. As we wrote a month ago, Credit Suisse has recently found value in capitalising on secondary market cat bond price rises.

During June, Credit Suisse had a relatively active month of secondary market cat bond trading, but true to its word, it recently said it would move out of many cat bond positions to focus on better returning reinsurance contracts, offloaded more positions than it took on.

Credit Suisse’s CS Iris Low Volatility Plus Fund strategically moved out of a number of cat bond positions in June, to capitalise on the mark-to-market price gains, but only bought one new position which it found attractive.

It said that the sales of these cat bond positions had been timed to allow it to take advantage of some better pricing in industry loss warranty (ILW) trades. Credit Suisse said that it had seen pricing in ILW trades improve in the prior month, particularly in sections of the ILW market trading in U.S. wind risks.

Credit Suisse’s fund also took a number of small positions in top layers of some regional Florida reinsurance programs, again finding pricing more attractive we presume.

The ILS investment manager said that it will continue to take advantage of attractive pricing where it can find it, suggesting that more of a focus on ILW’s may be on the cards and would also continue to invest in new cat bond deals, but only where they are particularly attractive to the portfolio.

Credit Suisse is not the only ILS investment manager to have adopted this strategy lately, a strategy which has also had the side effect of freeing up some cat bond positions for ILS funds which focus on those instruments, providing those funds with much needed opportunities to deploy capital as well.

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