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Är cat bonds really independent of equity?
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Cat bonds from an investor perspective
Team specialized in insurance risks
Nordic home turf
Update on California wildfires
How do cat bonds work?
Entropics Asset Management – Cat bond investments
Cat Bonds are securities that transfer insurance risks from an insurer to the financial markets. This provides for insurance coverage for people and enterprises facing catastrophe risk. To investors, Cat Bonds offer an asset class with low correlation and historically good risk adjusted returns.
|Fund||Rate||Since start||One week||One year||Report|
|SEF Entropics Cat Bond (Class A)||98.67||-1.33%||-0.09%||-4.62%||Latest report|
|SEF Entropics Cat Bond Fund Class I (institutional investors)||96.38||-3.62%||-0.08%||-4.30%||Latest report|
Fund investments entail risk. The value of investments in funds can increase as well as decrease and investors can loose all or some of the investment. Historical return is not a guarantee of future returns.
From our blog
The heatwaves and the wildfires in the Northern Hemisphere in the summer of 2018 have put climate change at top of the agenda of media and politics. As we already see the adverse effects of rising temperatures, it is important to assess the impact on insurance-linked securities (ILS). In summary, the typical cat bond term of 3 – 5 years provides for continuous adjustments of pricing to encompass both climate effects and a globally increasing need for insurance. As ILS are an important mean to mitigate climate risks, we are likely to see more ILS solutions in the future. Read more
In April, new outbreaks of the much-feared hemorrhagic fever Ebola shook the world again. The last major outbreak in West Africa 2014-2016 caused more than 11,000 deaths, and dealt a devastating blow to the long-term economies of several countries in the region. The effects were largely due to slow and insufficient response by the world community. However, this time, it appears that the lessons learned have provided for a much faster response, based on insurance principles and backed by cat bonds, rather than reliance on foreign aid. Read more
Both cat bonds and corporate bonds are fixed income instruments so it is relevant to compare the risk premium of cat bonds with similarly rated traditional corporate bonds. Currently, cat bonds pay a higher risk premium compared to similarly rated corporate bonds. Read more
The flooding from Hurricane Harvey was barely over when the world was alerted about Hurricane Irma. How could it be that the USA, after twelve years’ absence from major hurricanes, felt the impact of two record-breaking hurricanes over the course of one week? Read more
While investors are attracted to the uncorrelated returns of cat bonds, the purpose of issuers is to obtain insurance coverage against low frequency and high severity catastrophes. Consequently, we will eventually face an event large enough to cause extensive losses in the re/insurance industry and the cat bond market. However, an event, such as a hurricane category 4 or 5 making landfall in Southern Florida, also tends to increase future returns for investors, as the insurance industry need to attract new risk capital. Read more