The disaster bond market delivered the second-highest total-return in its historical past in 2024, reaching 17.29% for the full-year, in accordance with knowledge from the Swiss Re Cat Bond Efficiency Indices.
Whereas the disaster bond market’s efficiency fell behind the document set in 2023, at 17.29% the full-year 2024 total-return implies very robust efficiency from disaster bond fund methods and enticing returns for cat bond buyers.
It’s essential to notice although, that managed cat bond funds have a tendency to not ship fairly as excessive a return because the market Index that’s calculated by world reinsurance agency Swiss Re, with nearly all of methods having ranged between 12% and round 15% for full-year 2024 returns, in accordance with our sources.
It’s arduous to fully-replicate the index and nearly all of cat bond fund managers favor to try to generate their very own form of returns, based mostly on their particular administration and buying and selling philosophy, fairly than replicate a cat bond market beta.
The cat bond market’s efficiency in 2024 mirrored a market working on record-high danger curiosity spreads above anticipated loss, producing important returns for its buyers once more over the past yr.
At a 17.29% total-return for 2024 and now having delivered simply over 40% for the final two years, in accordance with the Swiss Re Index, disaster bonds stay one of many excellent performers within the mounted revenue, alternate options and hedge fund classes.
At a 17.29% total-return for 2024, final yr was the second highest annual efficiency on document for the Swiss Re cat bond Index.
With only a 2.40% differential to the document yr for the Index set in 2023, this quantity is roughly across the degree of recovered returns from price gains seen in the wake of 2022’s hurricane Ian not driving the losses that had been anticipated, that came through in the first-half of 2023, in addition to sure different worth associated dynamics that yr.
Which makes the 2024 annual return for Swiss Re’s disaster bond market Index all of the extra spectacular, as that restoration post-Ian was by no means going to be repeated. Which underscores simply how spectacular the 2024 full-year total-return for the cat bond market has been.
Wanting forward, how the current worth softening seen in major cat bond points impacts total-returns for 2025 stays to be seen.
At this stage, it appears unlikely the 2024 total-return could be equalled with no fast stabilisation of, or flip in pricing trajectory, or another change of fortunes.
Disaster bond pricing has softened in-line with world reinsurance and retrocession, in some circumstances maybe slightly extra, because the effectivity of those tradable and securitized devices turned evident once more within the last quarter of final yr.
Regardless of the current softening seen, disaster bond market returns proceed to trace at traditionally excessive ranges, which you’ll see proof of right here in our charts displaying cat bond pricing and spreads, in addition to cat bond multiples-at-market, by years and quarters, and in knowledge from Plenum Investments on the catastrophe bond market yield.
Find all of Artemis’ catastrophe bond market charts and data here, or through the Artemis Dashboard.
All of our charts are up to date as new disaster bond points full, and as older issuances mature, based mostly on the information in Artemis’ extensive catastrophe bond Deal Directory.
