The consequences of unfold widening within the disaster bond market are actually evident within the efficiency of the Eurekahedge ILS Advisers Index for April 2024, as non-public ILS funds outpaced cat bond methods for the primary time this 12 months.
Regardless of the unfold widening although, the Eurekahedge ILS Advisers Index that tracks a basket of disaster bond and insurance-linked securities (ILS) funds nonetheless delivered a constructive return of 0.51% for the month of April.
That takes the year-to-date return for the ILS fund index to three.60%, for the primary 4 months, which remains to be the third greatest begin to the 12 months because the Index started monitoring the market in 2006.
Even with the widening of cat bond spreads, nearly all of pure disaster bond funds nonetheless delivered constructive efficiency for the month.
Whereas the Swiss Re cat bond worth index fell 0.58% in April 2024, the overall return index nonetheless delivered a +0.57% constructive return.
Because of this, pure cat bond funds tracked by the Eurekahedge ILS Advisers Index have been up by +0.40% for the month of April, however non-public insurance-linked securities (ILS) funds that put money into collateralized reinsurance as nicely rose sooner at +0.60%.
One disaster bond fund out of the 27 ILS funds tracked by the Index fell to a adverse return, with the opposite 26 ILS funds all delivering one other constructive month.
The vary of efficiency throughout the 27 ILS funds was from -0.05% to as excessive as +1.51% for the month of April 2024.
Could is prone to be one other month the place disaster bond efficiency suffers as a result of results of the unfold widening that has been seen.
As we’ve reported, the consequences of the unfold widening has been to enhance the cat bond market yield, leading to a horny entry level for ILS buyers.
ILS Advisers highlights the truth that the unfold widening has been in part blamed on an update to the RMS hurricane risk model, as we’ve reported.
However the agency additionally explains that, “Nevertheless, markets didn’t react final 12 months after the competing AIR/Verisk mannequin replace resulted in related loss will increase.”
Including that, “The most recent hurricane forecasts, web new provide and seasonal results might also have performed a task.”
You’ll be able to observe the Eurekahedge ILS Advisers Index here on Artemis, together with the USD hedged model of the index. It includes an equally weighted index of 27 constituent insurance-linked funding funds which tracks their efficiency and is the primary benchmark that enables a comparability between totally different insurance-linked securities fund managers within the ILS, reinsurance-linked and disaster bond funding area.
