The catastrophe bond market index calculated by Swiss Re Capital Markets stabilized at its last calculation on Friday, October 14, 2023, with a slight increase due to the widening of spreads as secondary transactions accelerated after the hurricane Ian.
At the same time, there was little movement in one of the catastrophe bonds considered most exposed to losses from Hurricane Ian and the significant impact of the storms on Florida.
The Swiss Re Global Cat Bond Index provides a broad measure of the catastrophe bond market, as calculated by Swiss Re Capital Markets, the specialist insurance securities arm (ILS) of the global reinsurance company of the same name.
Having tracked the performance of the catastrophe bond market with its cat bond indices since 2007, the Swiss Re cat bond index is considered a reliable indicator of the health of equities and the cat bond market.
As we previously reported, the Swiss Re Global Cat Bond Index declined by around -10% at the first index calculation point after Hurricane Ian hit on 30 September.
Meanwhile, the Swiss Re US Wind Cat Bond Performance Index, which tracks the overall performance of USD-denominated catastrophe bonds exposed exclusively to the US Atlantic hurricane, fell around -32%.
A week later, at the next index calculation, the Swiss Re Global Cat Bond Index had fallen a further -0.27% as prices continued to adjust following Hurricane Ian, while the Swiss Re US Wind Cat Bond Performance index fell by a further -0.72%
But, at the time of the index calculation on October 14, we understand that these two cat bond indices have seen slight increases.
The Swiss Re Global Cat Bond Index was up just 0.01%, while the Swiss Re US Wind Cat Bond Performance Index was up almost 0.42%.
While not some sort of recovery, it is another encouraging sign that suggests the cat bond market has priced in all current expectations of losses from Hurricane Ian.
We understand that there has been little to no additional movement in catastrophe bonds exposed to losses from Hurricane Ian.
Indeed, the market, cat bond fund managers and investors await formal notices of loss from cat bond sponsors, which will provide greater clarity on the potential impacts.
Positively, secondary market trading in catastrophe bonds also accelerated after Ian, although much of the activity continues to be managers and investors adjusting portfolios in the wake of the storm and in prediction of losses.
Some sources also suggest that there is also an element of capital release, among some ILS fund managers, which could be partly to take advantage of new investment opportunities.
The widening of spreads seen in secondary trades contributed to the slight rise in the indices, we are told.
Which at least reflects how well the catastrophe bond market works, even after a major catastrophic event with serious ramifications for reinsurance and insurance-linked securities (ILS).
As we explained in our article from earlier today, the losses realized from Hurricane Ian for the catastrophe bond market could end up being as little as half of the decline in the value of market observed in the current cat bond market.
The stabilization of cat. also suggested recently.