yield

In recent days the lowest yielding earthquake catastrophe bonds in the ILS markets history have priced, with U.S. primary insurer State Farm’s $300m Merna Re V Ltd. U.S. earthquake cat bond offering the lowest coupon ever seen for a pure quake bond.

The return advantage provided by an investment in catastrophe bonds, over an investment in other forms of yielding debt instrument, has narrowed over the last two years, largely due to pricing pressure lowering yields on cat bonds more quickly.

The decline in catastrophe bond and insurance-linked security (ILS) spreads and premiums over the last year has been well document, with some tranches seeing 40% declines in pricing over comparable issuance a year earlier.

With the recent well documented decline in pricing of insurance-linked securities and catastrophe bonds having accelerated into the third-quarter the average multiple at market of catastrophe bonds has dropped to historically low levels, according to data from Lane Financial LLC.

The article we published yesterday on the average upsizing of catastrophe bond and insurance-linked securitizations (listed in our Deal Directory) so far in 2013 drew a number of questions. Some readers wanted to know how the pricing for these transactions had changed during the time they were offered in the market to investors, so we’ve […]