Cat bond market has plenty of “well-informed” capital, less frothy rates: Swiss Re CFO

The catastrophe bond market has seen plenty of “well-informed” capital which has helped to drive volumes this year, while rates in the cat bond market are now a little less “frothy” than they had been at times over the last year or so, Swiss Re’s CFO John Dacey said this morning.

Dacey also explained during this morning’s earnings call that Swiss Re’s activities in insurance-linked securities (ILS) continue to deliver tangible benefits for the company.

The reinsurance company reported its first-quarter 2024 results this morning, with a profitable period driven by lower losses and a combined ratio across the P&C reinsurance business of 84.7%.

Dacey made some comments about the catastrophe bond market, which he sees as remaining a complementary source of reinsurance capital.

He explained that large volumes of catastrophe bond issuance continue to be seen, with no signs of that reducing.

There is, in the cat bond market, plenty of “well-informed capital available” Dacey explained, suggesting the company sees this market as disciplined.

In terms of pricing in the cat bond market, Dacey said that “relative rates are a little less frothy than a year ago.”

While, overall, the catastrophe bond market “continued to be an important part of the market for named losses.”

But, cat bonds by remaining mostly focused on large and named catastrophe loss events, don’t “solve every problem” for insurers, Dacey said, as most insurance-linked securities (ILS) capital cannot provide the broad covers that a balance-sheet reinsurer such as Swiss Re enters into.

Later in the call, Dacey commented on the activities of Swiss Re’s Alternative Capital Partners (ACP) division, which is where third-party capital management, structuring of ILS and cat bonds, insurance-linked securities (ILS) fund management and operation of its retrocessional sidecars are undertaken.

While Swiss Re does not report its assets and fee income from these activities after the first-quarter of the year, Dacey noted that the contribution from them remains positive, especially across the ILS structuring side where Swiss Re has been active this year.

For full-year 2023, Swiss Re’s specialist Alternative Capital Partners (ACP) division reported a 68% increase to its fee income earned for the full-year 2023, reaching $195 million for the year.