Swiss Re Global Cat Bond Index

A market only becomes an asset class once it has a shared measure of performance. The index published by Swiss Re tracks the total return of dollar denominated cat bonds: it adds up coupons, which pay for the risk, and secondary market price changes, which record expected losses after a catastrophe. It lets insurance-linked securities fund managers benchmark themselves, and lets institutional investors judge whether the spread paid really compensates for losses. Reading it calls for two cautions: secondary prices are indicative more than traded, and the index covers only cat bonds, not private collateralized reinsurance, which is larger and riskier. An exceptional year often reflects less the absence of catastrophes than the level of spreads locked in after a heavy year.