2016 saw higher losses and lower returns for reinsurance assets compared to 2015. As catastrophe bond yields fell, the resulting mark-to-market bump improved the performance of those insurance-linked funds that deploy a high proportion of their funds in liquid assets.
Swiss Re's provisional estimate for global insurance losses in 2016 was $42 billion which included Hurricane Matthew and April's Japanese earthquakes. This compared with $28 billion in 2015.
Lane Financial has calculated that secondary-market catastrophe bond multiples reached new lows at the end of 2016. This movement has helped Lane's index of total cat bond returns to reach 7.1% in 2016 versus 4.2% in 2015 - despite the partial default of Gator Re.
Unlike most other instruments, ILW returns held reasonably steady at 1/1 renewals. Registered users can click here for the interactive version of this chart.
The net effect of the pricing movements and losses has been that the funds tracked by the Eurekahedge index improved from 4.2% to 5.2% from 2015 to 2016. The corollary of this effect is that when yields improve, the performance of some funds will be impaired.
Earlier this month, InsuranceLinked looked at other pricing indicators in this article.
Posted: Monday, January 30th, 2017