Over the course of the last month, what had been an environment of catastrophe bond spreads tightening has shifted to one where spread widening has been seen through most of April and into the first week of May, which alongside more balanced supply and demand, some attribute at least in part to the latest hurricane risk model update from Moody’s RMS.
Cat bond investment manager Plenum Investments has said that, with the update to the Atlantic hurricane model due in June, the market is shifting its view on risk already, resulting in additional spread widening being seen.
Risk model updates have driven fluctuations in the catastrophe bond market in the past, as new and updated views of risk adjust the common metrics that ILS investors and cat bond fund managers utilise.
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