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Catastrophe bonds show positive returns during most equity down months

A Sage Advisory analysis says cat bonds returned positive in about 79% of S&P 500 down months, with average gains of roughly 0.25% in those periods.

Reported · Written up by our desk · Reinsurance

Sage Advisory Services, through research led by Andrew Poreda, argues that catastrophe bonds can provide genuine diversification because they introduce a different risk premium and return source versus portfolios typically driven by equity, credit, and interest rate risks. The report says many portfolios appear diversified on the surface but still share the same underlying risks, which tend to show up together when defaults occur. In that context, Poreda frames cat bonds as instruments whose underlying risk drivers are structurally independent from traditional asset classes. In particular, Poreda highlights that catastrophe bonds generate positive returns in roughly 79% of equity down months, averaging about plus 0.25% during those periods. The analysis also points to low correlation to traditional assets, supported by the structural independence of the cat bond market’s risk drivers. Looking at a 10-year period ending May 5, 2026, the report states cat bonds posted positive returns during S&P 500 down months, where the index averaged a minus 4.2% drop, according to the analysis. Artemis reported the findings, noting Sage Advisory’s entry into the ILS space via its partnership with Cedar Trace Group.

Latest closeS&P 500 7,533.77 ▼0.5%

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