Cat bond fund news

So far, based on analysis of the catastrophe bonds in the UCITS structure that have priced their net asset value (NAV) since hurricane Milton struck Florida and where we have been able to access that data, the average mark-down across the funds is just -0.77%.

Having shown a divergence in manager strategies as NAVs moved in different directions at times and by different amounts as hurricane Milton approached, the US mutual investment funds that allocate to catastrophe bonds and other insurance-linked securities (ILS) diverged again at pricing on Friday, but have since stabilised having incorporated post-landfall net asset value adjustments.

Catastrophe bond fund manager Icosa Investments has highlighted current uncertainty over the level of losses the market may face from hurricane Milton, but notes that while some principal losses seem likely there remains a high level of uncertainty over certain structures, especially aggregate cat bonds that have much of their risk periods left to run.

A very strong September return across the group of UCITS catastrophe bond fund’s tracked by the Plenum CAT Bond UCITS Fund Indices has taken the average return for the year to October 4th to an impressive 10.6%, although hurricane Milton will dent this slightly once the storm is accounted for.

Analysis from Milliman concludes that hurricane Milton will end up a relatively minor catastrophe loss event for the insurance-linked securities (ILS) market, based on an estimate of insurance market losses in the $20 billion to $40 billion range.

According to analysis by Morningstar DBRS, the total private and public insurance market loss from hurricane Milton is expected to fall in the upper-half of a $30 billion to $60 billion range, with flood insurance losses to the NFIP expected to be up to $10 billion of the total.

According to analysis from ICEYE, the provider of satellite data and services to inform decision-making and analysis, more buildings may have been impacted by flooding from hurricane Milton in Florida than was seen with hurricane Helene.

In the wake of hurricane Milton’s landfall and damaging impacts on the state of Florida last week the catastrophe bond market fell by 1.34% and a range of outstanding cat bonds had their secondary marks priced down, some more considerably than others.

Hurricane Milton has had a less severe impact on catastrophe bonds than had been feared as the storm approached Florida last week, but this could still be sufficient to drive risk premiums higher according to specialist investment manager Plenum Investments.

Responding to the potential impact of losses from hurricane Milton, the catastrophe bond market has fallen by just 1.34% at the end of week pricing of the index calculated by Swiss Re Capital Markets, while the US wind specific version of the cat bond index fell by only 3.64%.