Capital markets generally faced a difficult time during the first half of 2022. Insurance Linked Securities performed reasonably well in this challenging environment and proved their merits as a diversifying asset class. However, an expectation by investors of higher return for the risk affected cat bond yields and pricing as well.
The year 2021 challenged the ILS industry on several occasions. Not only hurricane Ida, but as well a selection of other noteworthy events hit the reinsurance market and caused insured losses well in excess of 100 Bn USD. The Solidum Funds sailed safely through these troubled waters and were able to generate strong results for the investors.
The attached article (German only) reviews the past year and presents the ILS market at the turn of 2022.
In December 2021 the online forum der fonds (www.derfonds.com) conducted an interview with Solidum’s Chief Risk Officer Dr. Karsten Bromann for an article about the benefits of cat bond investments in a general investment portfolio. The Solidum Cat Bond Fund was presented as well, being able again in 2021 to outperform the group of peers selected for the story.
Inflationsszenarien und die Sorge vor steigenden Zinsen sowie die immer drängendere Frage, wie weit die klassischen Anlagemärkte heute ausgereizt sind, führen zu zunehmender Nervosität auf den Kapitalmärkten. In diesem Umfeld bleibt das Interesse an Insurance Linked Securities als diversifizierendes Element in einem Anlageportfolio in der ersten Hälfte des Jahres 2021 ungebrochen, was sich in einem hohen Neuemissions-Volumen und einem aktiven Sekundärmarkthandel zeigt.
During the second half of February, winter storm Uri caused widespread chaos and damage in the USA. Especially Texas was hard hit. First estimates of risk modelling firms put the insured losses in excess of the cost from the wildfires and hurricanes of the last years since 2017.
September 17, 2020
Shortly after the climatological mid-point of the hurricane season the tropical Atlantic presented itself quite active, sporting two hurricanes (Paulette and Sally) that affected land and one system (Teddy) that may come close to Bermuda in about week and poses an (albeit speculative) long-term threat to the Canada Maritimes.
Hurricane Paulette
August 28, 2020
Storm history
During the first half of the year 2020 cat bond yields and reinsurance premia continued to rise. The Swiss finance journal 'Finanz und Wirtschaft' reported on this development with a special feature in their July 29, 2020 issue, for which Solidum was visited and interviewed in great length to provide background information about the market and insight into opportunities and risks.
The German finance newspaper Börsen-Zeitung published an article on the market potential of pandemic cat bonds on June 25, 2020. In researching for the article, selected ILS specialists were interviewed, among them Dr Karsten Bromann of Solidum Partners. His outlook for these instruments is cautiously positive. Pandemic cat bonds can have some appeal for investors, but only in limited relation to the overall portfolio.
Solidum Partners AG
Mühlebachstrasse 70
CH-8008 Zurich
Switzerland
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