Hurricane season uncertainty drove cat bond trading shifts in 2024: Swiss Re

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The secondary marketplace for catastrophe bonds successful 2024 saw chiseled shifts successful trading activity, with periods seeing high-volumes of trades, arsenic good arsenic times erstwhile the marketplace was bid-heavy but less trades occurred, according to Swiss Re Capital Markets (SRCM), the insurance-linked securities (ILS) part of the planetary reinsurer.

In its past ILS Market Insights report, Swiss Re highlighted a surge successful trading astatine the extremity of the archetypal 4th of 2024, arsenic investors responded to redemption pressures by expanding enslaved sales.

However, arsenic the marketplace braced for a predicted “historically active” hurricane season, galore investors opted to clasp larger-than-usual currency positions, arsenic they anticipated opportunities to acquisition bonds astatine a discount successful the lawsuit of a ample hurricane.

“These currency positions, combined with the beardown coupon accrual successful the funds, contributed to a “bid-heavy” secondary marketplace passim overmuch of the 2nd fractional of the year,” SRCM noted.

Furthermore, the study besides highlighted however determination was a important diminution successful secondary marketplace trading during the 2nd fractional of the year, arsenic immoderate investors chose to clasp bonds contempt elevated valuations, alternatively than converting holdings into currency to reinvest.

“If they sold their bonds successful the secondary market, it was improbable that they would beryllium capable to acquisition caller bonds astatine charismatic prices,” SRCM explained, adding that this dynamic resulted successful less trades, but an abundance of liquidity.

By the 4th quarter, however, an uptick successful superior marketplace issuance began to power secondary trading, arsenic investors moved to escaped up currency to put successful recently issued feline enslaved deals.

This displacement yet helped reconstruct equilibrium betwixt proviso and request for currency successful the market.

SRCM concluded: “The marketplace begins the caller twelvemonth with a overmuch amended equilibrium betwixt the proviso and request for currency than observed successful aboriginal Q4 2024.”

In its latest ILS marketplace report, Swiss Re besides highlighted that the ILS marketplace has grown by 10.5% year-on-year, and is connected way to transcend USD 50 cardinal of notional outstanding successful the adjacent future.

Hurricane play uncertainty drove feline enslaved trading shifts successful 2024: Swiss Re was published by: www.Artemis.bm
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