Contenuto realizzato dalla versione inglese di Gooruf:
Days before Hurricane Harvey showcased its dose of disaster on the people of Texas, Artemis reported an outstanding CAT bond market of $29.87-billion. This looks to rapidly increase throughout 2017. While experts had initially predicted Harvey to be uneventful for those possessing CAT bonds, AccuWeather estimated interstate devastation to cost $190-Billion. While being unaffected, CAT’s have been in remarkable demand by buyers, who see these disasters as a booming business. Hurricanes, as with catastrophes in general, have a mixed relationship with CAT’s, and here we hope to unveil to you what these bonds are and what we will see of them in the future.
The mixed relationship with CATs and catastrophe
Catastrophe Bonds, as they’re more commonly known, were originally created in the aftermath of Hurricane Andrew in 1992. Andrew having caused more than $26.5-Billion worth of damage to the southern USA, placing enormous pressure on insurers nation-wide. The disaster created a need for bonds which would help these companies pay out to those affected by these catastrophes, hence the name. CAT bonds are regarded as somewhat desirable and act as a win-win for investors and insurance providers should disaster occur.
A win-win for investors and insurance providers
Investors can be attracted to these types of bonds depending on the rarity of disasters geographically. CAT’s, being largely unaffected by macro-economics, and if no disaster happens: investors can expect returns on their investments ranging from 8-15%. This is compounded however with the likelihood of loss if a hypothetical hurricane should become real. They’re seen as risky yet attractive due to the rarity of disaster as well as the diversity of bond types. These bonds can be as diverse as covering particular locations and even specific disasters, allowing vigilant investors a means to buy in.
They’re appealing to insurance providers as they provide a way to ensure they can cover damages to their customers. Hurricanes like Katrina requiring insurance pay-outs in excess of $41.1-billion would force insurance companies to either downsize coverage or face bankruptcy. These providers can choose to buy reinsurance to guard against this risk, with CAT bonds serving to soften the blow, should a disaster occur. With Harvey causing havoc, access to these bonds will allow for damages to be compensated for by an insurers claimants.
We sincerely hope this provides some insight into Catastrophe bonds, and encourage you to provide insight into this topic. Please don’t hesitate in getting in touch and giving your opinion!