Cat Bond Funds Post 10.22% Annual Return; BarmeniaGothaer Touts Flood ILS Resilience
By The Reinsurance Daily Editorial ·
Cat Bond Funds Post 10.22% Annual Return; BarmeniaGothaer Touts Flood ILS Resilience
Cat Bond Funds Average 0.62% June Return, Hit 10.22% Annually
Cat bond funds structured as UCITS vehicles generated an average return of 0.62% in June, according to the Plenum CAT Bond UCITS Fund Indices. This performance brought the 12-month rolling average return to an impressive 10.22% for the asset class. The June result reflects a relatively quiet start to the North Atlantic hurricane season, allowing funds to accrue premium with minimal loss impact. Performance was driven primarily by the high coupons on outstanding bonds issued during the harder market of the past 24 months. Total return for the index reached 5.45% for the first half of the year. The sustained high returns continue to attract capital into the ILS space, a factor contributing to the more competitive property-catastrophe renewal environment observed at the mid-year point.
BarmeniaGothaer CFO Credits Yardstick Re Flood Bond for Resilience
BarmeniaGothaer Group's CFO heralded the successful placement of the Yardstick Re AG (Series 2024-1) catastrophe bond as a core component of its strategy for managing extreme flood events in Germany. This transaction represents a rare example of a pure German flood peril being transferred to the capital markets. The CFO emphasized that the ILS placement directly underpins the group's resilience to such tail risk scenarios following a period of significant flood losses in the region. Although the full structural details of the €75 million bond were not disclosed, market sources referenced analytical figures including a 2% probability of attachment and initial pricing thoughts in the 1.95% to 2.00% range, indicating investor appetite for diversifying European perils outside of windstorm.
The transaction is a core component and an important building block in our group's resilience to extreme flood events. — BarmeniaGothaer Group CFO
Key Takeaways
- Leverage the reported 10.22% 12-month rolling return for UCITS cat bond funds as a key data point when negotiating ILS capacity or advising institutional investors on allocations for the upcoming renewal season.
- The BarmeniaGothaer CFO’s public endorsement of the Yardstick Re flood bond, combined with strong ILS fund returns, signals sustained European corporate demand for single-peril indemnity covers. This creates an opportunity to unbundle European programs and place specific perils like flood into the capital markets for better execution.
- While the 10.22% annual return for cat bond funds is compelling, the increasing placement of novel, thinly-modelled perils like German flood requires underwriters to rigorously stress-test vendor model output and apply significant qualitative loading to pricing assumptions.
- Note the 2% attachment probability on the Yardstick Re flood bond. This indicates appetite for riskier layers from ILS investors if the peril is diversifying and the sponsor is high-quality. European cedents should consider structuring tranches at similar return period levels to attract ILS capital.
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