Specialist investment manager Twelve Capital has highlighted another stunning year for the catastrophe bond market, pointing out that the Swiss Re cat bond Index has returned 40% in just two years, but also sharing a note of caution that further spread tightening is possible with investor demand elevated for the asset class.
Reviewing 2024, Twelve Capital explained, “The Catastrophe Bond (Cat Bond) market has shown remarkable resilience and strong performance in 2024. Spreads remain elevated, well above historical ranges, resulting in double-digit returns including collateral yield – while the asset class remains uncorrelated to traditional financial markets. The Swiss Re Cat Bond index has returned over 40% over the last 24 months.”
The investment manager went on to say that the majority of catastrophe losses were secondary peril related in 2024, meaning fewer flowed to the reinsurance industry and even fewer to the insurance-linked securities (ILS) market.
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