secondary cat bond

After an April which saw supply and demand for catastrophe bond and insurance-linked securities (ILS) paper become more balanced, the very strong primary issuance in May resulted in low secondary trading and the first negative month for pricing this year.

The increase in primary catastrophe bond market issuance in April, helped by almost $1 billion of new bonds issued and a pipeline containing more than $2 billion by the end of the month, helped to balance supply and demand in the secondary market.

Strong demand from investors for catastrophe bond notes in the secondary market continued to have an offsetting effect on seasonal price movements in February, as issuance still fails to satisfy excess investor appetite for the asset class.

Demand for catastrophe bonds from capital markets investors and specialist insurance-linked securities (ILS) fund managers remained strong in January, with both primary issued catastrophe bonds and secondary traded bonds seeing high demand.

Despite 2013 seeing the second highest level of catastrophe bond and insurance-linked security (ILS) issuance on record a feature of the year was rising secondary market prices and this trend continued into December.

The total return of the outstanding catastrophe bond market in 2013 has beaten the long-term average for the second year running, with the 2013 total return reaching a very healthy 10.9%, as measured by the Swiss Re Global Cat Bond Performance Total Return index.

November was the first month since February with no new catastrophe bonds completing, giving investors a lull before the inevitably busy end of the year and contributing to a modest months trading in the secondary market for cat bonds.

The two catastrophe bonds issued during the month of October went some way towards satisfying a little of the excess demand for insurance-linked securities (ILS) and as a result stimulated some rebalancing of investors secondary cat bond portfolios during the month.

The inexorable rise of the Swiss Re Global Cat Bond Performance Price Return index, which tracks the price return for all outstanding USD denominated cat bonds and has been rising consistently since late July, has slowed as we move through October.

The lack of hurricane activity in the tropical Atlantic contributed to a slow secondary market for catastrophe bonds and insurance-linked securities during the month of September, according to some ILS investment fund managers.