ILS fund returns outpacing every year except 2007 so far in 2024

According to the Eurekahedge ILS Advisers Index, the average return of the catastrophe bond and insurance-linked securities (ILS) funds it tracks was the second strongest on record for February, coming in at 1.04% for the month.

It takes the average ILS fund return for the first two months of the year to 2.2%, which is also the second strongest on record.

Both metrics, the February ILS fund return and the figure for the first two months of the year, are only beaten by 2007.

Pure catastrophe bond funds lead the way so far in 2024, with an average return of 1.12% for February taking their year-to-date return to 2.32%.

Meanwhile, private ILS funds that also allocate capital to collateralized reinsurance structures and deals averaged 0.95% for February and are running at an average fund return of 2.08% for the first two months of this year.

ILS Advisers noted that in February the spread tightening that has been seen continued in the catastrophe bond market.

In particular, they note the high demand being shown for industry loss trigger cat bonds, which the company suggests could be related to more generalist investor interest in cat bonds, rather than specialists, given the industry-loss trigger instruments “do not bear the underwriting risk of a specific insurer and therefore require less know-how to assess the underwriting quality.”

For the month, cat bond prices gained 0.56% in February, resulting in a +1.57% total return for the Swiss Re Global Cat Bond Index, ILS Advisers explained.

That continued strong total return of the catastrophe bond market is driving cat bond fund returns higher so far this year and after the first two months, the pure cat bond funds are currently outpacing the start of 2023.

In fact, Artemis’ page showing returns in the UCITS cat bond fund market shows that returns are also strong in March, with the data here updated to March 22nd.

Private ILS funds investing in collateralized reinsurance are also running ahead of 2023 after the first two months of the year.

Only one of the ILS funds tracked by the Eurekahedge ILS Advisers Index was negative in February 2024, with performance ranging from -0.33% to +2.50% in the month.

The fact ILS funds are outpacing 2023 is quiet remarkable so far and it will be interesting to see how long this can be sustained.

You can track the Eurekahedge ILS Advisers Index here on Artemis, including the USD hedged version of the index. It comprises an equally weighted index of 27 constituent insurance-linked investment funds which tracks their performance and is the first benchmark that allows a comparison between different insurance-linked securities fund managers in the ILS, reinsurance-linked and catastrophe bond investment space.