Swiss Re Capital Markets launches new cat bond indices in conjunction with S&P

Swiss Re Capital Markets is to launch a basket of cat bond performance indices: Swiss Re Cat Bond Indices.

The new indices will be calculated and maintained by Standard & Poor’s and are expected to improve the transparency of cat bond returns.

Swiss Re is launching the indices to “further promote cat bonds as an attractive asset class” according to the company, and hopes in future to work together with other trading institutions to make Cat Bond Indices a tradable product.

Although the index methodology will be owned by Swiss Re Capital Markets, the indices will be calculated on a weekly basis by S&P. Each Friday Swiss Re Capital Markets will provide S&P with weekly secondary pricing indications; S&P will in turn calculate the weekly index value and publish updated values on Bloomberg.

The move by the Swiss reinsurer came as cat bonds have increasingly become an important source of natural catastrophe capacity for both insurers and reinsurers. In 2006, the issuance of such bonds doubled to $4.9bn and their strong growth has continued during the first half of 2007 with $3.8bn issued so far.