Search

Investors in catastrophe bonds experienced minimal losses from Hurricane Milton, with potential returns of up to 12%. The market had anticipated losses of up to 15%, but actual losses are expected to be around 1% or less. Despite the active hurricane season, cat bonds have shown resilience, with market-beating returns and expectations for continued growth in assets under management for cat-bond funds. The parameters for cat-bond payouts are not expected to soften, with analysts predicting adjustments to cover only the most severe storms. [Extracted from the article]

The article discusses a growing trend in commercial real estate investment involving buying buildings with high carbon footprints and renovating them to be more environmentally friendly. This strategy has shown potential for significant financial returns, with some investors doubling their clients' money in just a few years. The push for green refurbishments is driven by new environmental regulations and tenant preferences, with many fund managers looking to capitalize on this trend. Despite the risks and challenges involved, there is a growing interest in flipping older, inefficient buildings into sustainable assets, with institutional investors and asset managers actively participating in this market. [Extracted from the article]

The cost of issuing catastrophe bonds is expected to increase as asset managers react to the aftermath of Hurricane Milton. While cat-bond portfolios may not be as heavily impacted as initially predicted, the withdrawal of risk-bearing capital from the market and reduced reinsurance capacity will likely lead to higher risk premiums in the cat-bond market. Despite evidence of minimal losses for investors, the cat-bond market has seen a slight dip. Catastrophe bonds provide financial protection against natural disasters, and while investors may face minimal losses, the impact on affected communities remains significant. [Extracted from the article]

Investors in catastrophe bonds have experienced lower losses than initially predicted after Hurricane Milton. Estimates that suggested losses of up to 15% have been revised to single-digit figures due to the hurricane's weaker impact. The insured losses are now estimated to be between $20 billion and $60 billion, resulting in a maximum hit of 4% for cat-bond investors. While this is a smaller dent than expected, it marks a shift from the record 20% increase in cat-bond securities in 2023. The cat-bond market is primarily focused on US storms, particularly in Florida. [Extracted from the article]

Investors in catastrophe bonds are preparing for significant losses as Hurricanes Helene and Milton are expected to trigger payment clauses on a large scale. Florida is bracing for the impact of Milton, which could be a Category 5 storm, potentially causing one of the biggest reinsurance loss events in history. If Milton hits Tampa directly, insured losses could range from $40 billion to $150 billion, with corresponding cat-bond market losses of 2% to 15%. Cat-bond investors may also face losses from the inland flooding caused by Hurricane Helene. [Extracted from the article]

Investors in catastrophe bonds are preparing for significant losses as Hurricanes Helene and Milton are expected to trigger payment clauses on a large scale. Milton, currently a Category 4 hurricane, is predicted to make landfall in Tampa, Florida, potentially causing one of the largest reinsurance loss events in history. The impact of these hurricanes could exceed the fallout from Hurricane Ian in 2022, leading to substantial losses for catastrophe bond investors. The potential losses from these hurricanes mark a turnaround for the debt market, which was highly profitable last year. [Extracted from the article]

Bond investors may be underestimating the risks of climate change on sovereign debt holdings, according to researchers studying the impact of climate change on bond markets. Credit ratings agencies are failing to fully capture the threat of extreme weather shocks in their ratings, leading to potential systemic implications. Countries with high climate-risk scores have a higher default risk, and poorer countries are particularly vulnerable as they cannot afford to invest in climate adaptation. Central banks are starting to monitor climate-related financial risks, and researchers predict that many sovereigns may face climate-induced downgrades in the coming years. [Extracted from the article]

Bond investors may be underestimating the risks of climate change on sovereign debt holdings, according to researchers studying the impact of climate change on bond markets. Credit ratings agencies are failing to fully capture the threat that extreme weather shocks pose to bond markets. A high climate-risk score is linked to high default risk, and countries most at risk of climate-related downgrades are often economically vulnerable. Poorer countries may face ratings downgrades in the coming years, making it harder for them to invest in climate adaptation. [Extracted from the article]

Bond investors are being urged to update their risk models to account for the threat of extreme weather events caused by climate change. Researchers have found that credit ratings currently fail to capture the risk posed by climate-related shocks to sovereign debt holdings. The failure to integrate climate risk into ratings has led some asset managers to rethink their bond exposures. Studies have shown that current ratings methodologies are mispricing risk in the global sovereign bond market, with potential systemic implications. Countries with high climate-risk scores have a higher default risk, and poorer countries are particularly vulnerable as they cannot afford to invest in climate adaptation. [Extracted from the article]

ING Groep NV, the largest bank in the Netherlands, has announced plans to further reduce its financing of fossil-fuel companies in order to lower emissions in its loan portfolio and achieve a net zero target by 2050. The bank will no longer finance companies that continue to develop new oil and gas fields, and it plans to stop providing new financing for liquid natural gas terminals after 2025. ING has already pledged to cut loans for oil and gas exploration and production by 35% by 2030. This move aligns with other European and UK banks that have imposed restrictions on financing new oil and gas fields. However, some environmental groups argue that ING is not doing enough to curb emissions and are considering legal action against the bank. ING believes that it is taking the right steps and is closely assessing the emissions disclosures of its corporate clients. Those that do not take sufficient steps to curb emissions may face stricter loan conditions or be denied financing. [Extracted from the article]

ING Groep NV, the largest bank in the Netherlands, has announced plans to further reduce its financing of fossil-fuel companies in order to lower emissions in its loan portfolio and achieve a net zero target by 2050. The bank will no longer finance companies that continue to develop new oil and gas fields, and it has already pledged to end all funding of upstream oil and gas activities by 2040. ING's outstanding exposure to upstream oil and gas activities decreased by almost 40% last year. The bank also intends to stop providing new financing for liquid natural gas terminals after 2025. ING joins a growing list of European and UK banks that have imposed restrictions on financing new oil and gas fields. However, some environmental groups argue that ING is not doing enough to curb emissions. ING is closely assessing the disclosures of its corporate clients and those that do not take sufficient steps to reduce emissions by 2026 may face stricter loan conditions or be denied financing. [Extracted from the article]

Insurers are facing increasing challenges as the planet warms and natural disasters become more frequent. Global insured catastrophe losses exceeded $100 billion for the fourth consecutive year in 2023, and losses in the first half of this year have already reached $62 billion. Reinsurers, who provide insurance to primary insurers, have raised their prices and are demanding more favorable terms, leaving primary insurers to bear more risk. Reinsurers have become more averse to backstopping smaller but more frequent extreme weather events, known as secondary perils, which are harder to model and manage due to climate change. Severe convective storms alone accounted for $70 billion of insured losses globally last year. Reinsurers have trimmed their exposure to secondary perils, while primary insurers, particularly in the US, have borne the brunt of these losses. Despite this, most reinsurers would still be financially secure even in the event of a once-in-a-100-year natural catastrophe causing over $250 billion in industry losses. Reinsurers are now expanding their operations on their own terms, with higher prices and tougher policy conditions. Moody's Ratings has raised its outlook for the global reinsurance sector to "positive," citing factors such as higher premiums, tougher policy conditions, and lower exposure to secondary perils. The top 19 reinsurers increased their overall risk exposure to natural catastrophes by 14% based on January renewals. The expectation is that global reinsurers will deploy more capital over the next two [Extracted from the article]

A new report by risk modeling firm Verisk suggests that urban expansion, property exposure, and climate change could lead to a 40% increase in annual natural-catastrophe losses for the global insurance industry. The projected annual loss could rise to $151 billion, compared to the average annual loss of $106 billion over the past five years. While hurricanes and earthquakes are anticipated to be the largest single events causing losses, severe convective storms, extra tropical storms, wildfires, and floods account for over half of the projected losses. Climate change is expected to have a more significant impact on losses in the coming decades, with higher global temperatures affecting all atmospheric perils. [Extracted from the article]

Fermat Capital Management, a major investor in catastrophe bonds, has experienced lower returns due to concerns about this year's hurricane season. The selling pressure in the secondary market was driven by fears of a severe hurricane season. Despite this, cat bond investors have not suffered significant losses so far. Cat bonds provide additional coverage for extreme weather events and can generate high returns if a catastrophe does not occur. The market for cat bonds is still firm and offers attractive returns, according to analysts. However, the supply of cat bonds is increasing, and the market may experience price volatility depending on the severity of the hurricane season. [Extracted from the article]

Hedge fund Fermat Capital Management, a major investor in catastrophe bonds, has seen a significant decrease in returns due to concerns about this year's hurricane season. The selling pressure in the secondary market caused returns to be low or negative for many funds in May. Despite this, Fermat's returns for the first half of the year were in line with the Swiss Re Global Cat Bond Performance Index, but still only half of last year's returns. While cat bond investors have not experienced large losses yet, the market remains uncertain as the hurricane season progresses. [Extracted from the article]

Catastrophe bonds, which provide an extra layer of disaster coverage for insurers, reinsurers, and governments, have been generating double-digit returns for investors while increasing costs for issuers. Concerns have been raised about the fairness of this risk-reward dynamic, particularly after Jamaica's catastrophe bond was not triggered despite being declared a disaster area. The Caribbean heads of government are seeking an examination of cat bonds and other insurance-linked securities, prompting a debate about the fairness and equity of the strategy. While some argue for lower trigger thresholds, the World Bank warns that this would increase premiums. [Extracted from the article]

Catastrophe bond issuance is projected to surpass the record set in 2023 due to factors such as climate change, population density, and inflation. Swiss Re's analysis reveals that over $12 billion worth of catastrophe bonds were issued in the first half of 2024, putting it on track to exceed the $15.6 billion issued in 2023. These bonds allow insurers to transfer risk to the capital markets, and investors can experience significant gains if a predefined catastrophe does not occur. The appeal of catastrophe bonds was highlighted when trigger terms protected investors from losses during Hurricane Beryl. The market for catastrophe bonds reached $46.5 billion in the first half of the year, excluding private transactions. Despite the increasing frequency of secondary perils like storms, floods, and wildfires, cat bond investors have not suffered direct losses. However, these events contribute to the erosion of various aggregate structures in the market. The report also mentions that more than 70% of outstanding cat bonds are exposed to US hurricanes, with the season typically peaking in August and September. Assuming market stability, 2024 is expected to break another record in terms of primary issuances. [Extracted from the article]

Impax Asset Management, the world's largest publicly traded fund manager focused on sustainability, has experienced a decline in fee revenue and the performance of clean energy companies in its portfolio. The company has also faced fund outflows, partly due to weaker demand from BNP Paribas Asset Management, its largest shareholder. The transition from carbon to clean energy has lost momentum globally, as indicated by a World Economic Forum report. Despite these challenges, Impax's CEO, Ian Simm, remains optimistic about the long-term investment potential of the energy transition. The company has diversified its holdings beyond pure sustainability investments and is seeking to reduce client outflows and lower costs. Analysts believe that a recovery for Impax may be slow but expect the transition to clean energy to continue. [Extracted from the article]

The article discusses how investors in catastrophe bonds, also known as cat bonds, have been able to avoid losses despite the active hurricane season. Catastrophe models have become increasingly sophisticated, allowing bondholders to navigate their way through weather-related calamities. The article also mentions that Jamaica, despite being declared a disaster area after Hurricane Beryl, did not need to call on cat bond investors to cover any costs because the air pressure required for a payout was not reached. The current average yield on cat bonds is almost triple the level investors received in 2020, providing a buffer for potential losses. [Extracted from the article]

Investors in catastrophe bonds, which allow issuers to transfer risk to capital markets, have been successful in avoiding losses from recent natural disasters. Hurricane Beryl, which caused significant insured losses in the US, Caribbean, and Mexico, did not trigger any payouts for cat bond investors. The success of these investments can be attributed to sophisticated catastrophe models and the need for hurricanes to make landfall in densely populated areas. While climate change poses a growing threat, investors are better prepared and have reduced exposure to volatile loss risks. [Extracted from the article]

Hurricane Beryl recently hit Jamaica, causing significant damage and leading the prime minister to declare the entire island a disaster area. However, investors in Jamaica's $150 million catastrophe bond, arranged by the World Bank, will not be affected by the hurricane. The specific terms of the bond protect investors from financial losses, as the air pressure required for a payout was not reached. While this is fortunate for investors, it poses a challenge for Jamaica as it now has to clean up after the hurricane. Jamaica has a total disaster safety net of $1.6 billion, including insurance policies and lines of credit. The country's sovereign bonds were also not heavily impacted by the hurricane. Catastrophe bonds, like the one in Jamaica, allow issuers to transfer part of their risk to capital markets. Jamaica became the first small island state to independently sponsor a catastrophe bond in 2021, and the bond was renewed in April for an additional $150 million in insurance cover. The International Federation of Red Cross has highlighted the increased vulnerability of small Caribbean nations due to climate change, with storms becoming stronger and causing more destruction. While cat bonds have been profitable for investors, caution has been urged due to predictions of an unusually active hurricane season. [Extracted from the article]

Investors in Jamaica's catastrophe bond, which was intended to cover the costs of natural disasters, will not be affected by the damage caused by Hurricane Beryl. The bond, arranged by the World Bank, has specific terms that shield investors from financial losses. While this is fortunate for investors, it poses a challenge for Jamaica as it now has to clean up after the hurricane. Catastrophe bonds allow issuers to transfer risk to capital markets, and Jamaica became the first small island state to independently sponsor a cat bond in 2021. The bond was renewed in April for $150 million in insurance cover for named storms. [Extracted from the article]

Catastrophe bonds, also known as cat bonds, are becoming increasingly popular among retail investors. Cat bond funds marketed under Europe's UCITS label, which is designed to protect retail investors, have seen a 12% increase in assets under management this year, reaching a record $12 billion. Cat bonds are issued by insurers to transfer risk to capital markets, and investors can earn high returns if a predefined catastrophe does not occur. However, they also face substantial losses if a catastrophe does occur. The market for cat-bond UCITS is expanding, allowing more investors to participate in this asset class. Regulators are monitoring this development to ensure that the rules are being used as intended. [Extracted from the article]

Catastrophe bond sales have reached a record high as the market prepares for an active hurricane season. Sales of these bonds, which allow insurers to transfer risk to the capital markets, are 38% higher this year compared to the same period in 2023. The $4 billion issued in May alone represents the largest volume of catastrophe bonds ever sold in a single month. However, some veteran investors are looking to reduce their exposure due to forecasts of a particularly active hurricane season. The risks associated with holding these securities have led to higher returns being demanded by investors. [Extracted from the article]

Global banks are implementing new measures to assess the risk of loans to commercial real estate based on carbon emissions and the cost of upgrades needed to comply with green regulations. The European Union's Energy Performance of Buildings Directive (EPBD) is a key driver of these changes. Banks such as BNP Paribas, Banco Santander, Barclays, ING Groep, and NatWest Group are targeting significant reductions in emissions intensity in their commercial real estate portfolios. Retrofitting buildings to meet environmental regulations is becoming increasingly costly, posing a significant risk to banks. Banks may turn to private markets or synthetic securitizations to offload this risk. The ability of the commercial real estate sector to transition to a lower-carbon economy depends on retrofitting existing buildings, and banks are adjusting their lending criteria and bond underwriting accordingly. Failure to address these risks could result in reprimands from regulators and climate litigation. The complexity of differing national regulations across EU member states presents challenges for banks in setting explicit targets for financed emissions in residential real estate loans. Banks are calling for more support from policymakers to navigate these challenges. [Extracted from the article]

Banks in Europe are facing a growing risk in their residential mortgage portfolios due to energy consumption. Many households in Germany, for example, are unable or unwilling to invest in energy-efficient upgrades for their homes, which could lead to a decline in property values and have wider economic effects. Deutsche Bank estimates that individual homes may need over €100,000 worth of renovations to comply with the EU's energy performance standards, posing affordability challenges for homeowners. Banks are exploring structured capital-relief instruments and green mortgages to address these risks, but there is a lack of funding to bring housing stock in line with environmental standards. The European Union aims to cut emissions in the building sector by 60% by 2030 and achieve complete decarbonization by 2050. However, the majority of buildings in the EU were built before 2000 and have poor energy performance. Deutsche Bank acknowledges the challenges but expects progress towards net-zero emissions in the German real estate sector through investments in infrastructure and green building materials. However, estimates suggest that over 60% of homes in Germany alone would need green renovations in the next decade to meet the EU's energy requirements, which would cost between €740 billion and €1 trillion. Deutsche Bank faces limitations in issuing green mortgages due to a lack of energy performance certificate ratings for its residential real estate customers. Additionally, paying off a mortgage associated with a high-emissions home does not change the emissions of the building, creating a deceptive image of emissions reductions. One-third of Deutsche Bank [Extracted from the article]

Deutsche Bank has entered into a capital-relief deal with the European Investment Bank (EIB) that allows the bank to offer discounts on over €600 million ($652 million) of green mortgages in Germany. This agreement reflects the growing trend in the finance industry to use capital-relief products to facilitate more green deals in response to stricter regulations and competition. The deal involves the EIB guaranteeing a €150 million mezzanine tranche in a consumer-loan securitization with Deutsche Bank. The bank plans to expand its mortgage-financing business and offer clients more financing options to invest in energy-efficient housing. The European Union's goal is to reduce emissions in the building sector by 60% by 2030, and Deutsche Bank's partnership with EIB aims to support this goal by providing low-interest loans for constructing or improving climate-friendly homes in Germany. [Extracted from the article]

Deutsche Bank has entered into a capital relief deal with the European Investment Bank (EIB) that allows the bank to offer discounts on over €600 million ($652 million) of green mortgages in Germany. This agreement reflects the growing trend in the finance industry to use capital relief products to facilitate more environmentally friendly deals. By transferring a portion of their portfolio risk to a third party, banks can reduce their capital requirement. The EIB will guarantee a €150 million mezzanine tranche in a consumer-loan securitization with Deutsche Bank, enabling the bank to expand its mortgage-financing business and offer clients additional financing options for energy-efficient housing. The European Union has set a goal of cutting emissions in the building sector by 60% by 2030, making climate-friendly housing a priority. [Extracted from the article]

Catastrophe bonds and other insurance-linked securities (ILS) are facing challenges due to climate change and the increasing frequency of smaller weather events. Risk models used to calculate these bonds often underestimate the risks associated with high-frequency events like wildfires and thunderstorms. Investment managers specializing in cat bonds, such as Elementum Advisors, have had to refine their models to account for the changing climate. Secondary perils, including wildfires, floods, and thunderstorms, are becoming the fastest-growing type of natural disaster, causing concern for cat-bond investors. The models used to price these bonds need improvement to accurately assess the risks associated with secondary perils. [Extracted from the article]

Zurich Insurance Group AG has announced that it will no longer underwrite new oil and gas projects and will crack down on clients planning to expand in metallurgical coal mining. The company aims to achieve net zero emissions by 2050 and believes that further exploration and development of fossil fuels is not necessary for the transition. While the policy update is limited to new projects, Zurich plans to engage with its highest-emitting corporate customers to reduce their carbon footprints. The move represents a significant shift for the company, which currently insures fossil-fuel infrastructure. [Extracted from the article]