Flirting with disaster: A closer look at catastrophe bonds
The potential for high returns, and low correlations with other asset classes, make catastrophe bonds an intriguing option for investors.
Blown away: Returns have been anything but catastrophic for catastrophe bonds, which have returned almost double their U.S. corporate and Treasury peers over the past five years.
Volatile market: The number of hurricanes has varied quite a bit by year, as have the monetary losses. Storms in 2004 and 2005 caused a significant amount of damage in the U.S.
Speed bump: The credit crisis resulted in a decrease in the issuance of insurance-linked bonds. Although issuance has seen some signs of life, the market is still well below 2007 highs.
Long-winded: Currently 68% of all catastrophe bonds are tied to wind-related incidents in the U.S. and Europe. Geographically speaking, 72% of all outstanding catastrophe bonds are U.S.-focused.
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