Hurricane Ian 2022

Catastrophe bond funds in the UCITS format have reported a record start to the year, delivering almost 4% in returns on average in the first-quarter of 2023, according to the latest data from the Plenum CAT Bond UCITS Fund Indices.

The lower-risk group of catastrophe bond funds structured in a UCITS format have now seen their average returns recover back to levels last seen just prior to hurricane Ian, as the cat bond market continues to deliver strong returns in the wake of that storm.

Consultancy Lane Financial LLC has published an interesting paper where they analyse insurance-linked securities (ILS) ( catastrophe bond) market actual losses based on indicative pricing, versus modelled expected losses and global industry views, finding that the actual may underplay the expected, leading them to conclude the market remains inefficient.

There has been an additional $10 million redemption of outstanding principal from the extended Class B tranche of notes issued under the US Federal Emergency Management Agency’s (FEMA) FloodSmart Re Ltd. (Series 2020-1) catastrophe bond issuance, Artemis has learned.

Catastrophe bond returns remain very strong as the higher spread environment continues to deliver in 2023 and as a result the average return across UCITS cat bond fund strategies has now reached 3.07%, at March 17th.

Catastrophe bond funds in the UCITS format have reported very strong returns year-to-date, with the average return across the main UCITS cat bond strategies now reaching 2.62% as of March 3rd.

One tranche of the FloodSmart Re catastrophe bond program has had its maturity extended to allow for further development of the NFIP’s flood insurance losses from hurricane Ian, Artemis has learned.

Hannover Re, a major player in insurance-linked securities (ILS) market facilitation through its fronting and risk transformation activities in collateralised reinsurance and catastrophe bonds, booked a $900 million piece of its gross loss from hurricane Ian related to that business.

Given the strong recovery in many catastrophe bonds and private ILS that were exposed to hurricane Ian, as well as the now elevated returns in the market on the back of higher reinsurance pricing and risk-free collateral returns, some insurance-linked securities (ILS) strategies could recover to levels seen before Ian by the end of March.

Activity in the catastrophe bond market during the first quarter of 2023 suggests that sponsors have built on the orderly year-end renewal, with initial indications pointing to a shift in momentum across the market, according to Aon Securities, the insurance-linked securities (ILS), catastrophe bond and capital markets arm of the insurance and reinsurance broker.