Friday, October 8, 2010

"Catastrophe bond price and total return indices still rising"


Another month has passed since our last post looking at the health of the insurance-linked securities and catastrophe bond indices which are published by Swiss Re. These indices give us a good indication of the health of cat bond prices and returns and also investor activity and appetite.

Again, we can see further gains have been made by both indices with the Swiss Re Cat Bond Price Return index having hit a five year high on the 1st October. It hit a level of 97.65 which is the highest since 2005 when the index dropped significantly after hurricane Katrina.

A lot of this rise is due to the Atlantic hurricane seasons lack of bite this year. We have yet to see any major landfalling storm on the Gulf, Florida or East coast of the U.S. despite the season being very active. This has been particularly unusual as the season has actually been highly active with three more named storms than a full season average so far (and more than a month of the season to go).

First we look at the Swiss Re Cat Bond Price Return Index, tracking the price return for all outstanding USD denominated cat bonds (which you can quote and chart through Bloomberg here). Sitting happily at a five year high of 96.75 this index looks like it has further to go this year.
Swiss Re Cat Bond Price Return Index
Swiss Re Cat Bond Price Return Index

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