FOURTH QUARTER 2013 | ISSUE 1
While peak perils, particularly US
hurricane and US earthquake, continue
to dominate as the reinsured risks
underlying cat bonds, there has been
a certain amount of diversification
to include such perils as US wildfire,
storm surge, severe thunderstorms,
Canadian earthquake, Australian
cyclone, Japanese earthquake and
European windstorms. We have also
seen variations on natural catastrophe
bonds to cater for post-event contingent
capital, extreme mortality risks and
extreme medical benefits claims levels.
A Broadening Appeal
To date, in addition to generalist
investors, a host of dedicated ILS
hedge funds, and more recently
reinsurer-backed asset managers, have
been established. In summary, cat
bonds have particular attractions for
the capital markets that have helped
shaped innovations to date.
The capital markets like liquidity;
hence the use of debt instruments,
issuer ratings, exchange listings and
the development of secondary markets.
This also means that innovation has
remained within short-tail lines. Notes
typically have