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Opportunities in Catastrophe Bonds
Tuesday 07 May 2024
Investment Talks
Opportunities in Catastrophe Bonds
May 2024 | As a structurally uncorrelated source of risk and return, we believe catastrophe bonds and inflation-linked securities (ILS) may permit investors to build more diversified and resilient portfolios. This could be particularly true now, as the rate on line (the ratio of premium paid to loss recoverable in a reinsurance contract) for private ILS formats and the cat bond market spread remain elevated and could provide attractive total yield potential. We believe the combination of continued elevated pricing, combined with the ongoing demand for reinsurance, may present an attractive investment opportunity throughout the remainder of 2024 and into 2025.
01 | The performance of insurance-linked securities, including catastrophe bonds, is linked to low-probability but high-severity events. As a result, their performance generally has a low correlation to traditional financial markets.
02 | The reinsurance industry has existed for over 150 years, and its benchmark, the Swiss Re Global Cat Bond Index, has delivered positive returns in 20 of the past 21 years.
03 | A supply/demand imbalance for reinsurance, compounded by recent events over the past several years, may have significantly increased the investment opportunity, and we expect these trends to continue into the foreseeable future.
Important Information
Unless otherwise stated, all information contained in this document is from Amundi Asset Management as of April 30, 2024 . Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the [author] and not necessarily Amundi Asset Management and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product or service. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not indicative of future results. Amundi US is the US business of Amundi Asset Management.
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