trading

The recent selling off of catastrophe bonds, which has largely provided a mechanism for ILS fund managers to free up capital to put towards renewal deals, has resulted in much higher secondary market trading volumes but this has added mark-to-market price pressure and as a result dented total returns.

Trading of catastrophe bonds in the secondary market has increased in the last fortnight as some ILS fund holders free up capital in advance of the approaching reinsurance renewals, so the benefits of the liquidity within these the fully securitized instruments becomes evident again.

Speaking at the recent SIFMA IRLS 2018 conference in Miami, insurance-linked securities (ILS) market participants and experts highlighted the benefit of increasing the speed of information flow to the market, something which could help the secondary market operate more efficiently when disaster strikes.

Once again the discussion of exchange-traded weather risk management products for Indian farms, companies and insurers has come to the fore, but this time the plan is for a product to be launched after September of this year.

Trading of catastrophe bonds in the secondary market was a little slower last week, with just four bond trades recorded by FINRA’s TRACE system. However the focus remains on higher coupon cat bonds, as some investors snap up any that are offered in the market.

Once again, the last week has seen an increasing focus on higher yielding catastrophe bond notes in the secondary trading market, as investors seek to maximise their returns with any opportunities to buy notes that yield above the average of recent new issuance.

Many of the secondary market catastrophe bond trades recorded by FINRA’s TRACE system in the last week have again been at lower price levels. Meanwhile the focus on short-dated bonds continued, with a number changing hands.

Once again, every catastrophe bond trade recorded by FINRA’s TRACE system in the last week is at a lower price level than the cat bond’s previous trade. Fewer of the short-dated cat bonds traded, with more of a focus on higher-yield 2016 maturing bonds.

Once again the last seven days has seen a number of short-dated, soon to mature catastrophe bonds, which offer higher yields than recent primary issuance, traded in the secondary market, as investors continue to be attracted to these opportunities.

Secondary market catastrophe bond trades captured by FINRA’s TRACE system in the last week showed a trend towards lower pricing, especially for short-dated bonds which continue to change hands.