What has driven catastrophe bond spreads to record highs?

With spreads on cat bonds at or near record highs and volatility in public markets pronounced, some investors are understandably weighing up if now is a good time to allocate to ILS as an uncorrelated asset class.

We believe that many investors could indeed benefit from incorporating ILS. However, it is worth a closer look at underlying dynamics within the (re)insurance industry, as well as the ILS market, to know what to expect.

Here we explain why spreads have widened as they have, explore the conclusions investors can draw when assessing the opportunity, and outline what they can expect to see in coming months.

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