The catastrophe bond market delivered the second-highest total-return in its history in 2024, reaching 17.29% for the full-year, in accordance with data from the Swiss Re Cat Bond Performance Indices.
While the catastrophe bond market’s performance fell behind the record set in 2023, at 17.29% the full-year 2024 total-return implies very strong performance from catastrophe bond fund strategies and attractive returns for cat bond investors.
It’s necessary to notice though, that managed cat bond funds tend to not deliver quite as high a return because the market Index that’s calculated by global reinsurance firm Swiss Re, with nearly all of strategies having ranged between 12% and around 15% for full-year 2024 returns, in accordance with our sources.
It is tough to fully-replicate the index and nearly all of cat bond fund managers prefer to try to generate their very own shape of returns, based on their specific management and trading philosophy, slightly than replicate a cat bond market beta.
The cat bond market’s performance in 2024 reflected a market running on record-high risk interest spreads above expected loss, generating significant returns for its investors again during the last yr.
At a 17.29% total-return for 2024 and now having delivered just over 40% for the last two years, in accordance with the Swiss Re Index, catastrophe bonds remain considered one of the outstanding performers within the fixed income, alternatives and hedge fund categories.
At a 17.29% total-return for 2024, last yr was the second highest annual performance on record for the Swiss Re cat bond Index.
With only a 2.40% differential to the record yr for the Index set in 2023, this amount is roughly across the level of recovered returns from price gains seen within the wake of 2022’s hurricane Ian not driving the losses that had been anticipated, that got here through within the first-half of 2023, in addition to certain other price related dynamics that yr.
Which makes the 2024 annual return for Swiss Re’s catastrophe bond market Index all of the more impressive, as that recovery post-Ian was never going to be repeated. Which underscores just how impressive the 2024 full-year total-return for the cat bond market has been.
Looking ahead, how the recent price softening seen in primary cat bond issues affects total-returns for 2025 stays to be seen.
At this stage, it seems unlikely the 2024 total-return could be equalled with no quick stabilisation of, or turn in pricing trajectory, or another change of fortunes.
Catastrophe bond pricing has softened in-line with global reinsurance and retrocession, in some cases perhaps just a little more, because the efficiency of those tradable and securitized instruments became evident again in the ultimate quarter of last yr.
You’ll be able to read far more on the recent price dynamic within the catastrophe bond market in our brand latest report, available to download here.
Despite the recent softening seen, catastrophe bond market returns proceed to trace at historically high levels, which you may see evidence of here in our charts displaying cat bond pricing and spreads, in addition to cat bond multiples-at-market, by years and quarters, and in data from Plenum Investments on the catastrophe bond market yield.
Find all of Artemis’ catastrophe bond market charts and data here, or via the Artemis Dashboard.
All of our charts are updated as latest catastrophe bond issues complete, and as older issuances mature, based on the info in Artemis’ extensive catastrophe bond Deal Directory.