{"id":493,"date":"2025-03-21T08:00:24","date_gmt":"2025-03-21T09:00:24","guid":{"rendered":"http:\/\/alteredconcept.com\/?p=493"},"modified":"2025-03-28T11:54:33","modified_gmt":"2025-03-28T11:54:33","slug":"florida-attractive-as-it-trades-above-overall-cat-bond-market-spread-tenax-capital","status":"publish","type":"post","link":"http:\/\/alteredconcept.com\/index.php\/2025\/03\/21\/florida-attractive-as-it-trades-above-overall-cat-bond-market-spread-tenax-capital\/","title":{"rendered":"Florida attractive, as it trades above overall cat bond market spread: Tenax Capital"},"content":{"rendered":"

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Tenax Capital, the London based asset manager that operates a UCITS cat bond strategy, considers Florida exposed catastrophe bonds more attractive now, seeing improvements in the insurance environment there and an excess spread available for its allocations, compared to cat bonds for certain other regions.
\n<\/span>
\n\"tenax-capital-catastrophe-bond-portfolio-managers\"A year ago, Tenax Capital was carefully watching Florida insurance and reinsurance market developments and was encouraged by the claims experience associated with 2024 hurricanes, which has encouraged the investor to allocate more capital to cat bonds covering the state in 2025.<\/p>\n

Artemis spoke with Tenax Capital insurance-linked securities (ILS) portfolio managers Toby Pughe and Marco della Giacoma to learn more about their growing confidence in Florida.<\/p>\n

Pughe began, \u201cIn our view, Florida remains attractive from both a pricing perspective and due to its continuously improving legal environment. While last year we preferred to stay on the sidelines \u2014 waiting for a test of the new regulatory framework and to ride out the anticipated active hurricane season \u2014 we now consider Florida wind an attractive risk to add to the portfolio.<\/p>\n

\u201cIt has always been a \u2018marmite\u2019 state, but it\u2019s undeniable that the wind is currently in the carriers\u2019 sails. The relatively low industry losses from Milton and Helene exemplify this. Depending on how you clean the data \u2014 Florida is still trading about 100\u2013150 bps above the overall market spread.\u201d<\/p>\n

della Giacoma, continued, \u201cBecause of Florida\u2019s concentrated risk, investors are always going to be wary. But we\u2019re more concerned about states with relatively poor risk standards, where even a low industry loss could trigger bond defaults or significant mark-to-market volatility. Whether it makes sense to add lower-quality risks simply because they aren\u2019t in Florida \u2013 or because a fund is of a size where it\u2019s required to do so \u2013 is up for debate.\u201d<\/p>\n

Further explaining the Tenax strategy Pughe said, \u201cIndex bonds have tightened, and there will always be someone at the back of the room shouting, \u201cBut I can\u2019t keep fattening my tail!\u201d. But, if the choice is between overweighting tail risk or taking on what we typically describe as frequency risk (e.g., secondary perils or poorly modelled risk), the decision ultimately comes down to balancing return stability (historically speaking) with the potential for unexpected volatility from frequency risk.\u201d<\/p>\n

Overall, Tenax Capital remains encouraged with the state of the catastrophe bond market, but believes that discipline must be maintained.<\/p>\n

\u201cAlthough spreads have tightened over the past 12\u201318 months, the most important factor for us is that the underlying terms and conditions remain healthy,\u201d della Giacoma told us.<\/p>\n

\u201cWe don\u2019t mind sacrificing a bit of premium as long as these terms remain favourable.<\/p>\n

\u201cOur focus is on maintaining discipline throughout the cycle and avoiding the rinse-and-repeat mistakes the market tends to make.\u201d<\/p>\n

Florida attractive, as it trades above overall cat bond market spread: Tenax Capital<\/a> was published by: www.Artemis.bm<\/a>
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