Secondary trading

Prices on US hurricane cat bonds have regained value on the secondary cat bond market following the post-Sandy price falls last month.

The Swiss Re Cat Bond Price Return Index has gained 1.3 percent over the past week, after PCS' first loss estimate for Hurricane Sandy forecast just $11bn of total insured losses

Investors have been willing to trade bonds exposed to uncertainty about Sandy losses, but some were subject to hefty markdowns, leading the Swiss Re Cat Bond Price Return Index down 2.6 percent the week after the storm struck.

Trading on the secondary cat bond market has been limited during the onset of hurricane Sandy as investors took a wait and see approach to trading opportunities.

(Re)insurers need the scale of the capital markets to absorb some of the challenges of the longevity market, as the life expectancy age for adults continues to grow

Broker dealer Lane Financial estimated that average premiums in the ILS and industry loss warranty (ILW) market dropped 10 percent during the second quarter

Secondary cat bond pricing has begun levelling out after an uptick that began in early June, when high demand for bonds pushed up prices, as 2012 vintage bonds continue to price above par

Several new investors are looking to take on positions in the ILS market as secondary market pricing offered attractive discounts by the end of Q1 2012, Willis Capital Markets & Advisory (WCMA) says in its quarterly update on the market.

Secondary cat bond pricing fell 2 percent in the first quarter of 2012 as an active new issuance pipeline and selling pressure pushed the market down, according to Aon Benfield Securities.

Secondary trading volumes have been dampened by the busy new issuance pipeline as investors focus mostly on building up their portfolios with new deals

Pricing on the Swiss Re cat bond price return index has continued its slow plunge to a two-year low this month as significant ILS investors seek other reinsurance opportunities

An abundant supply of cat bonds for sale on the secondary market pushed pricing to a 12 month low this month.