Cyber cat bond prices hold-up, showing investor demand: Plenum – Artemis.bm


While the broad trend for much of the catastrophe bond market has been one of spread widening since April, one category of cat bond deals has seen prices hold-up far better than most, the cyber catastrophe bond segment.

Plenum Investments, the Zurich based catastrophe bond fund manager, highlighted this fact in a recent webinar, discussing the fact that cyber cat bonds appear to be exhibiting the price behaviour of an asset that is facing continued higher demand from investors.

Dirk Schmelzer, Head Portfolio Manager ILS/CAT Bonds and Partner at Plenum Investments AG, explained that the cyber cat bond market got off to a strong start towards the end of 2023, with the first four 144A cyber cat bond issues, for a total volume of $415 million.

Since then, we’ve recorded just one more 144A cyber cat bond so far, a second PoleStar Re deal sponsored by Beazley, taking the total outstanding to $575 million.

View details of all the 144A cyber cat bonds in our Deal Directory.

Schmelzer explained that Plenum invested in some of the cyber cat bonds when issued in its Dynamic cat bond fund, because the company “felt that the spreads might include a novelty premium.”

“It seems to be the case because, what we see currently when we look at the prices of all these bonds, they all mark above par,” Schmelzer went on to say.

Adding that this is, “An indication that these bonds are sought after in the secondary market and have not seen spread widening, but in fact have seen spreads tightening.”

The fact the cyber cat bonds have held their price far better than many natural catastrophe bonds through the recent period of spread widening also indicates continued demand from investors for this type of risk.

It also means that those investors who were early to allocate to them have benefited from a rising of their prices, so have captured market gains.

Being a smaller category within a much larger market, it is perhaps no surprise that cyber cat bonds have been facing high investor demand in the secondary market.

Plenum Investments believes that this is also a signal of a market segment with potential.

“We are pretty optimistic that this market segment has more room to grow,” Schmelzer explained.

Adding that, “We expect more issuances in the cyber segment. We hope that the market develops and offers different types of risks maybe also for investors, so that we can diversify.”

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