With catastrophe bond market returns remaining elevated, the cat bond market index calculated by Swiss ReCapital Markets rose again in the last week, regaining all of the decline seen from hurricane Milton and more, to now stand 0.25% higher than when that storm hit.
When catastrophe bonds were priced for the first time after hurricane Milton’s landfall inFlorida, the Swiss Re GlobalCat Bond Total Return Index, that tracks the entire outstanding catastrophe bond market, fell 1.34%.
A week later, as the impacts of the storm became clearer, the Swiss Re catastrophe bond market index bounced back, to leave the benchmark for the entire cat bond market only-0.30% down, while the US wind specific version of the cat bond index also recovered to -1.31% since the hurricane made landfall.
Now, with another week of catastrophe bond pricing reported onOctober 25th, the Swiss Re Global Cat Bond Total Return Index, that tracks the entire outstanding catastrophe bond market has regained all of the decline caused by hurricane Milton, to stand 0.25% up since the storm.
The Swiss Re US Wind Cat Bond Total Return Index, that is focused solely on US hurricane risks, also rose again in the last week, to stand just -0.50% down since Milton, as of Friday October 25th.
Rather than the last week being another example of positions recovering, this increase in the indices has been driven more by accumulated seasonally driven returns, so more a case of a return to business as usual.
While there have been some fluctuations in pricing of cat bond positions exposed to potential losses from hurricane Milton, these seemed more minor in the latest pricing sheets seen by Artemis, so suggesting that it is just a return to the more typical trajectory we’d expect from Swiss Re’s Index at this time of year.
The Swiss Re Global Cat Bond Total Return Index that reflects the performance of the entire cat bond market has now reached a new all-time high, as of October 25th’s pricing.
Thanks to a 0.55% gain for the Global Cat Bond index and 0.82% gain for the US Wind Cat Bond Index, at pricing on October 25th, over the nearest month of pricing both are now positive.
The Global Index is now up 0.73% since September 27th, while theUS Wind Index is up by 0.03%.
Meaning that, while the Global Index has absorbed hurricaneMilton’s initial mark-to-market impacts within just the two following weeks, the US Wind Index has absorbed it within its last month of returns.
Year-to-date, since October 27th 2023, the Swiss Re Global CatBond Total Return Index is now up by 16.13%, while the Swiss Re US Wind CatBond Total Return Index is up by 16.34%, reflecting the strong performance delivered to catastrophe bond investments over the last year and driving home the fact hurricane Milton did not derail that.
It’s also worth a look at the Plenum CAT Bond UCITS Fund Indices which initially saw a -0.42% fall on hurricane Milton, at October 11th.
The latest data for the UCITS cat bond fund index shows a combination of partial recovery for certain positions, as well as typical seasonal returns, bringing this additional catastrophe bond market bench mark back to just 0.1% below where it stood pre-Milton, as of October 18th.
Hence, it looks like the UCITS cat bond fund index will also regain all of the hurricane Milton decline within just two weeks, once its pricing data is available for October 25th.
