November a “prime time” for making cat bond investments: Icosa

With the peak of the Atlantic hurricane season now passed the risk of this peril inflicting major losses on the catastrophe bond market has diminished somewhat and, with spreads remaining at attractive levels, fund manager Icosa Investments has highlighted an attractive entry point to cat bonds.

Icosa Investments explained, “As we head into November, cat bond investors have an ideal window of opportunity. With the peak of the North Atlantic hurricane season now behind us, the probability of major storms disrupting portfolios has dropped significantly and will reach its seasonal minimum soon.

“Historically, the period from November through June is the least likely to bring severe storm events, making it a strong entry point for those looking to optimize their entry into the asset class with minimized seasonal risk.”

With the impacts of recent hurricanes becoming clearer now, catastrophe bond market yields recovered from the initial mark-to-market movements related to hurricane Milton quickly, leaving the cat bond market in a position where yields are still historically very attractive.

There is still an element of the effects of the hurricanes in the market yield though, which can serve to make the current capital deployment opportunity into cat bonds even better.

Icosa Investments said, “The cat bond market is currently offering favourable conditions, with spreads still elevated from this year’s major hurricane events, Helene and Milton.

“These events have kept spreads at attractive levels, making this an opportune moment for investors to enter or expand their positions while yields remain compelling.”

The investment manager also warned though, “At the same time, investors should be cautious about where they allocate capital, as some cat bond portfolios remain exposed to potential loss creep from recent events.”