Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Plenum cat bond fund see’s some recovery in Japan quake exposed bonds in April


Plenum Investments, an investment manager with a focus on alternatives such as insurance-linked securities and catastrophe bonds, saw some small recoveries in catastrophe bonds exposed to Japanese earthquake risks in their portfolio during April according to their latest report on their cat bond fund performance.

Cat bonds exposed to Japanese quakes have seen declines since the earthquake and tsunami disaster in Japan which have driven down the returns and value of many specialist investors funds. Plenum say that they expect the small recoveries seen during April to accelerate as it becomes clear to market participants which deals are actually at risk of loss or activation and what the eventual toll on cat bonds from this event will be.

Overall the Plenum funds saw performance down by about 10 basis points over April which they attribute to small mark to market losses on most cat bonds, mainly those with U.S. hurricane exposure as the spreads widened in the run up to the start of the hurricane season. They expect U.S. hurricane exposed cat bonds will continue this trend until the season begins in June, this is a typical trend that can be observed each year. Plenum say they’ve also seen some pressure on cat bond prices in the secondary market due to the anticipation that reinsurance premiums could rise a little after the high catastrophe losses of the first quarter.

Plenum also comment that the market for primary cat bond issuance has been quiet but expect activity to pick up as hurricane season nears.

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