Insurance-Linked Investments: Appetite for catastrophe


Investors cannot get enough of the catastrophe bond market, writes Charlotte Moore, but the potential for equilibrium, albeit at lower returns, is there

The global financial crisis highlighted the advantages of investing in catastrophe bonds to the pensions industry. All other risk assets proved to be strongly correlated in the turmoil but these insurance-linked securities, which provide protection from extreme weather and earthquake events, remained immune from the shockwaves. They also generate a decent return, making them very attractive to institutional investors.

“Since January 2002 to February 2013, the Global Swiss Re Cat Bond index has generated a compound annual growth rate of 8.9%, with very little volatility,” says Judith Klugman, head of ILS distribution and sales at Swiss Re.