Cat bond rally holds through year-end, delivers nearly 15% for 2023
Pure-play cat bond investment funds closed 2023 without suffering so much as a single week of losses, with a key market dollar-denominated index finally racking up nearly 14.9% in gains for the year and over 18.4% since lows hit shortly after Hurricane Ian.
The dollar-denominated market index for cat bond funds rose 0.2% for the final week of the year, its 56th week of uninterrupted gains, a weekly index of bond fund pricing compiled by Plenum Investments shows. Even against pre-Ian levels, the dollar-denominated index is up nearly 10.7%.
Euro- and Swiss franc-denominated indexes lagged the dollar measure in the final week as they did all year long. The euro-denominated index ended with a 13% gain in 2023 and the franc-denominated measure rose 10.8%.
Secondary market gains in Q4 and throughout 2023 came despite a heady supply of new issuance on the primary market, ultimately ending in a record annual sum.
The cat bond market grew by over $7 billion, or 21%, to over $42 billion, an all-time high, analysts at Aon said in their year-end summary to the market. 2023 broke the record for the largest-ever level of catastrophe bond issuance, at $15.4 billion, Aon claimed, citing deals from 30 issuing insurers and 14 issuing reinsurers for a combined total of $10.1 billion, plus government entities with $4.8 billion issued.
The array of total return performance indexes, published weekly by Plenum Investments, are built on broker quotes for a group of 15 pure-play cat bond UCITS investment funds. Sub-indexes divvy up results by currency unit class and a classification of risk profile subject to semi-annual review.
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