Cat Bond Funds Deliver 10.22% Return as Brokers Report Competitive Mid-Year Renewals
By The Reinsurance Daily Editorial ·
Cat Bond Funds Deliver 10.22% Return as Brokers Report Competitive Mid-Year Renewals
Cat Bond UCITS Funds Post 0.62% June Return, Maintain Double-Digit Annual Performance
The UCITS catastrophe bond fund market produced an average return of 0.62% in June, contributing to a strong 12-month rolling average return of 10.22%. This performance reflects a relatively quiet month for major insured catastrophe events and continued high coupon levels on new issuances. The returns demonstrate the asset class's ongoing yield attractiveness to institutional investors, with consistent monthly gains supporting capital inflows. The performance of the Plenum CAT Bond Fund index serves as a key benchmark for tracking the returns of the most liquid ILS strategies available to the European investor base.
BarmeniaGothaer CFO Cites Yardstick Re Bond in Extreme Event Resilience Strategy
The successful placement of the Yardstick Re AG cat bond provides a new source of collateralised flood reinsurance for the Gothaer Allgemeine Versicherung AG and Barmenia Allgemeine Versicherungs-AG pool. A BarmeniaGothaer executive confirmed the bond's role in strengthening the group's capital resilience against extreme weather events in Germany. The transaction helps manage earnings volatility from secondary perils. The structure provides protection against German flood events exceeding a specified index value, with an initial attachment probability of 1.95% and an expected loss of 1.22%.
The Yardstick Re transaction is a core element of our capital management strategy, diversifying our reinsurance panel and securing capacity to protect our balance sheet in the face of increasing climate-driven volatility from perils like the 2021 Bernd flood.
Munich Re Expands Global ILS Solutions Team, Appoints Benhalima to Structuring Role
Munich Re has appointed Meryem Benhalima as Manager Structuring within its Global ILS Solutions team. The appointment signals the reinsurer's continued investment in its third-party capital management and ILS structuring capabilities. Benhalima will be based in Munich and will focus on developing and structuring ILS solutions for the firm's institutional investor clients. This personnel move underscores Munich Re’s strategy to grow its fee-income business by connecting cedent needs with the risk appetite of third-party capital providers. Benhalima previously served at Natixis CIB.
Brokers Report Competitive Mid-Year Renewals Favoring Cedents
Major reinsurance brokers have characterized the mid-year renewal season, particularly for Florida property-catastrophe programs, as highly competitive. An influx of traditional and ILS capital has created favorable conditions for cedents, with reports of oversubscribed programs and pressure on pricing. This environment contrasts sharply with the hard market conditions of the past 24 months. The reports indicate that after a period of remediation, reinsurers showed increased appetite for catastrophe risk, leading to more cedent-friendly terms and conditions than were available during the 2023 renewals.
Flood Re Proposes Payout Restrictions for High-Value UK Properties
The UK's Flood Re scheme has announced it will implement changes to limit payouts for the country's most affluent households. The move aims to focus the government-backed pool's resources on properties where flood cover is least affordable or available. By reducing its exposure to high-value homes, which are often classified in the highest council tax bands, Flood Re intends to maintain its financial stability and subsidization capacity for its core mission. The policy shift could push more complex and high-value flood risks back into the private market, affecting portfolio accumulations for carriers in specific postcodes.
Key Takeaways
- Given broker reports of competitive mid-year renewals, underwriters should demand robust data on unmodeled secondary perils, such as the German flood exposures covered by the Yardstick Re bond, before conceding on pricing.
- Munich Re's ILS team expansion concurrent with cat bond funds delivering a 10.22% rolling return confirms that large reinsurers are embedding third-party capital as a permanent, competitive threat on peak perils.
- With ILS strategies like the Yardstick Re bond now covering secondary perils, treaty buyers can be challenged to demonstrate how their own retention and capital models account for events below the headline catastrophe layers.
- Flood Re's planned subsidy cuts for high-value UK homes will likely transfer high-severity, low-frequency flood risk to the private market, creating a potential aggregation and pricing challenge for reinsurers covering high-net-worth portfolios.
Sources
Cat bond fund UCITS average 0.62% return in June. 12-month rolling-return 10.22% — artemis.bm
Yardstick Re flood cat bond underpins BarmeniaGothaer’s resilience to extreme events: CFO — artemis.bm
Munich Re appoints Benhalima as Manager Structuring within Global ILS Solutions team — artemis.bm
Cedents Find Competitive Market Conditions at Midyear Reinsurance Renewals: Brokers — insurancejournal.com
Flood Re to Cut Insurance Payouts to Richest UK Households — insurancejournal.com