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Cat bond market in a healthy position with higher-for-longer collateral returns: Plenum

With catastrophe bond issuance so far in 2024 outpacing prior years and supply and demand dynamics contributing to an increase in spreads in recent weeks, Dirk Schmelzer, Managing Partner and Senior Portfolio Manager at Plenum Investments, the Zurich-headquartered manager of insurance-linked securities (ILS) and related assets, feels the market is in a very healthy and effective position.

During a recent webinar hosted by Plenum, Schmelzer discussed the risk spread of cat bonds, revealing that the current spread level is roughly 200 basis points above the 10-year average, and has actually been on an upward trend since 2016.

After an all-time high of 11.37% in January of last year, due to Hurricane Ian recovery, Schmelzer explained that the market average risk spread has come down, but has again been on the rise since April 2024, driven by supply of new transactions exceeding demand.


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