secondary cat bond

Once again, July saw very strong demand for catastrophe bond investments with the secondary market feeling the effects of demand outstripping supply of new issuance, resulting in further price rises and an active cat bond secondary trading market.

Secondary trading in the catastrophe bond and insurance-linked securities (ILS) market picked up in the first-quarter of 2016 following a less active close to 2015, however, Q2 saw trading volumes decrease again owing to reduced primary issuance, according to Aon Benfield.

Ongoing high levels of demand for catastrophe bond investments continued to push up pricing in the secondary market in June, with non-U.S. issues seeing the highest rises as the seasonal effects of the hurricane season helped to keep pricing of U.S. wind bonds a little more subdued.

Insurance-linked investors and catastrophe bond fund managers took advantage of the continued unseasonable rise in secondary market cat bond prices, to lock in investment gains, as investor demand drove them higher again in May 2016.

Demand for investing capital into catastrophe bonds drove prices higher in the secondary ILS trading market during April, as a lull in primary issuance pushed investment managers to trading desks in search of opportunities to invest.

Trading in the secondary ILS and catastrophe bond market during the first-quarter of 2016 was far more active than the final quarter of last year, with trade volumes increasing by more than 25% according to reinsurance broker Aon Benfield.

The month of March saw limited activity in the secondary trading market for catastrophe bonds, as new issuance of $565m of more broadly marketed cat bonds and a $300m club deal that wasn’t widely marketed, failed to stimulate much demand for portfolio adjustments.

An estimated $6 billion of catastrophe bonds were traded in the secondary market in 2015, underlining increased liquidity in the sector as investors become more and more comfortable with the asset class, according to Steve Emmerson of Tullett Prebon.

Trading activity and pricing in the secondary market for catastrophe bonds was mixed in February, as a reasonable balance of trading helped the market avoid feeling over bought or sold, while issuance levels didn’t force too much investor portfolio activity.

Deutsche Bank Securities Inc. is set to place less emphasis on its secondary catastrophe bond and ILS trading desk, while increasing its focus on other services it provides to the ILS market, from financing to prime brokerage.