Swiss Re Insurance-Linked Fund Management

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ILS funds continue strong start to 2023, with best returns since 2007


Insurance-linked securities (ILS) funds delivered another strong month of performance in February 2023, with every ILS fund represented in the Eurekahedge ILS Advisers Index reporting positive returns for the month, but with catastrophe bond funds leading the way.

ILS fund and cat bond fund performance returns IndexFebruary 2023 saw the average return of ILS funds tracked by the Index reach 0.82%.

Historically, that is the third best February return on record for this ILS fund Index and the best reported since 2010.

It takes the year-to-date returns for the Eurekahedge ILS Advisors Index to 1.95% after just the first two months of 2023, which is the strongest start to the year for this ILS fund Index since 2007.

Cat bond prices continue to drive strong total returns for funds and this was a key driver of performance through the start of 2023 for this ILS fund Index.

February saw cat bond prices rising 0.83%, which delivered a very strong total return for the Swiss Re cat bond index, of 1.72% for the month.

Thanks to this strong cat bond market performance, the group of pure catastrophe bond funds tracked by the Eurekahedge ILS Advisers Index delivered a 1% return in February.

The group of ILS funds that also invest in private deals and collateralised reinsurance delivered a 0.68% return for the month.

Every one of the ILS funds represented in the Eurekahedge ILS Advisers Index reported positive February returns, which is notable as the first month this has occurred for some time.

It shows not just the strong cat bond performance, which has been driving returns not just for pure cat bond funds, but also for some mixed strategies that accumulate most of their returns from collateralised reinsurance seasonally during the Atlantic wind season.

But it likely also reflects continued recovery on the private ILS side from prior year catastrophe events and a stabilisation of performance for many collateralised reinsurance strategies that is increasingly going to feature in the market, it now seems.

Across the ILS funds tracked by the Index, performance ranged from 0.11% to +1.35% for February 2023.

ILS fund and cat bond fund performance returns Index

You can track the Eurekahedge ILS Advisers Index here on Artemis, including the USD hedged version of the index. It comprises an equally weighted index of 26 constituent insurance-linked investment funds which tracks their performance and is the first benchmark that allows a comparison between different insurance-linked securities fund managers in the ILS, reinsurance-linked and catastrophe bond investment space.

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