The market where catastrophe notes trade between investors after issuance, at quoted prices.
The secondary market for insurance-linked securities lets an investor sell a position before maturity, to market makers quoting two-way prices. In practice it concerns only public formats, private notes being designed to be held. The problem it solves is liquidity in an asset class whose instruments run three years: with no exit route, investors would demand an illiquidity premium that would make cover dearer for cedants. The secondary market also gives a continuous price signal, where the primary market speaks only at renewal dates. Its quotes respond to three things: the approach of a risk season, which lifts the value of loss-free time elapsed; the occurrence of an event, which moves exposed notes sharply; and model revisions, which can sink a note with no physical event at all. Volumes stay modest against the outstanding stock, and dry up precisely in the weeks following a major event.
A hurricane-exposed note trades at 101.2 percent of par in June 2026, the season not yet having begun. As a major system approaches in September, quotes fall to 68 percent in four days, on volumes of 2.1 million dollars against 14 million in preceding weeks. The system weakens before landfall: the note recovers to 96 percent within three weeks.
ILS secondary market, Secondaire ILS, Cat bond secondary trading, Marché secondaire cat bond