$380m implied Helene & Milton cat bond loss keeps pricing in neutral territory: Lane Financial
1. Helene & Milton cat bond loss
Hurricane Ian has resulted in an implied loss of $380 million to the cat bond market, according to Lane Financial. The loss is associated with the $500 million Helene Re Ltd. (Series 2020-1) cat bond, which provides coverage against Florida named storms.The implied loss estimate is based on a market price of around 62% for the Helene Re cat bond, which suggests that investors believe there is a 38% chance that the bond will be fully redeemed.
2. Pricing in neutral territory
Despite the implied loss, pricing in the cat bond market has remained relatively stable, according to Lane Financial. This is likely due to a number of factors, including the fact that the cat bond market is still relatively small and that there is a large amount of capital available to invest in cat bonds.Additionally, the cat bond market has been supported by a number of new issuances in recent months, which has helped to offset the impact of the Helene & Milton loss.
3. Outlook for the cat bond market
The outlook for the cat bond market is uncertain, but Lane Financial believes that pricing is likely to remain in neutral territory in the near term. This is due to the fact that there is still a large amount of capital available to invest in cat bonds and that the cat bond market is still relatively small.However, the cat bond market could become more volatile if there are a number of large hurricane losses in the coming years.
