Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Insurance-linked securities & cat bond returns keep rising


It’s time for another look at the health of the insurance-linked security and catastrophe bond indices. Again we bring you data from the Swiss Re pair of indices which give us a good indicator for how the market is fairing and also of investor appetite.

The indices have both continued to rise since our last update, helped in part by the lack of any major land-falling hurricane but also helped by an influx of investors over the last few months who are helping to keep things generally positive. We still think we’ll see a dip in these indices the moment a hurricane destined for landfall appears. We are a little surprised that Earl didn’t dent the indices at all. Meteorologists are now suggesting that the weather pattern which caused the Russian heatwave and Pakistan floods has been helping to keep the Atlantic less active than was predicted, this must be encouraging investors.

First the Swiss Re Cat Bond Price Return Index, tracking the price return for all outstanding USD denominated cat bonds (which you can quote and chart through Bloomberg here). This index has been rising rapidly since July despite the insistence of experts that an active hurricane season was approaching. This is testament to the current profile surrounding insurance-linked securities as an investment opportunity and demonstrates the current demand. The index rose 0.4% in the last week and sat at 96.1 on 3rd September. If these rises continue we could see this index hit an all time high (that will be very hurricane dependent).

Swiss Re Cat Bond Price Return Index

Swiss Re Cat Bond Price Return Index

Now we can take a look at the Swiss Re Cat Bond Total Return Index, tracking the total rate of return for all outstanding USD denominated cat bonds (which you can quote and chart through Bloomberg here). It’s a similar picture of health for this index as it has continued to rise.

Swiss Re Cat Bond Total Return Index

Swiss Re Cat Bond Total Return Index

How long these gains can continue is anyone’s guess. We’re hearing from investment managers and institutional investors that there is still a huge appetite to invest in cat bonds at the moment but capacity and options have been limited. So even should hurricanes dent these indices slightly we believe that once new cat bonds are issued later in the year we should see them quickly snapped up by investors which will help to keep these indices buoyant.

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