ILS fund Index returns 0.81% for October 2024 despite hurricane Milton: ILS Advisers

Reflecting the ability of the majority of the market to absorb initial mark-to-market losses from hurricane Milton within just a number of weeks, the broad benchmark index for insurance-linked securities (ILS) funds, the Eurekahedge ILS Advisers Index, delivered a positive 0.81% return for the month of October 2024.

Every ILS fund tracked by the Index delivered a positive return for the month, which is quite remarkable when you consider the loss event hurricane Milton had been feared to be.

With hurricane Milton making landfall on October 9th, this shows just how rapidly ILS fund managers developed their views on potential impacts from the loss event and reversed many initial mark-downs, to end the month positively.

While Milton was estimated to be a significant insurance and reinsurance industry loss ($20bn to $60bn), ILS Advisers noted that, “emerging claims data suggest that losses are likely to fall toward the lower end of this range.”

Overall, ILS Advisers said that hurricane Milton will only have “limited impact” on the ILS funds sector, despite being a significant event for the broader insurance market.

“Losses are anticipated to affect only select junior structures, with the broader ILS market remaining largely insulated,” the company explained.

So far, for 2024, the Eurekahedge ILS Advisers Index is at its third-highest level of return, for the first 10-months of any year.

Were it not for spread effects that dented May’s performance and then Milton in October, then this Index would undoubtedly be at its second-highest level, only trailing last year at this stage and likely trailing 2023 by less than one percent.

With the overall catastrophe bond market delivering a 0.97% total-return, according to reinsurance firm Swiss Re’s Index, it’s no surprise that pure catastrophe bond funds averaged an impressive 0.84% for October, according to the ILS Advisors Index.

Meanwhile, the private ILS fund strategies tracked by the ILS Advisers Index, so those funds that invest across ILS instruments including collateralized reinsurance and retrocession, delivered a slightly lower 0.81% average return for October 2024.

With every ILS fund tracked by the Index positive for the month, the lowest performer came in at just +0.01%, while the best performing ILS fund returned 0.97%.

The year-to-date return for this ILS fund Index now stands at 10.5% after October.

November could be a relatively strong month as well, especially given there could be some recovery of value after Milton marks from October.

This Index is still on track for its third, or perhaps second best annual performance on-record, depending on how strong the last two month’s of the year are.

You can track the Eurekahedge ILS Advisers Index here on Artemis, including the USD hedged version of the index. It comprises an equally weighted index of 26 constituent insurance-linked investment funds which tracks their performance and is the first benchmark that allows a comparison between different insurance-linked securities fund managers in the ILS, reinsurance-linked and catastrophe bond investment space.