Secondary market news

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.

A more balanced ratio of buyers to sellers in the secondary market for catastrophe bonds resulted in a greater degree of equilibrium during January 2016, helping to support and stabilise prices, while the market saw elevated liquidity thanks to post-renewal portfolio adjustments.

International reinsurance giant Swiss Re’s Capital Markets (SRCM) trading desk witnessed its highest volume of activity since 2010, at $950 million of trades from more than 90 separate tranches of catastrophe bond notes during 2015, according to a report from the firm.

Liquidity in the secondary market for catastrophe bonds rose in December, as an active period of primary cat bond issuance combined with the approach of the key January reinsurance renewals, stimulated investor portfolio rebalancing.

An increase in primary catastrophe bond deal-flow, as well as the approach of the key reinsurance renewals on 1st January, stimulated greater liquidity in the secondary market for cat bonds in November.

The seasonal spread tightening in secondary prices of catastrophe bonds decelerated in October, as the U.S. wind season passed its peak and ILS investors and managers began to anticipate another loss free hurricane season.

Higher demand for secondary market catastrophe bond and ILS investment opportunities helped to drive prices higher in September, which alongside seasonality in the peak month of the U.S. wind season, drove attractive cat bond returns in the month.