Growing hunger for “cat bonds”

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Mar 2018

Willis Towers Watson is forecasting increased recourse to the “cat bonds” market in 2018. The upsurge in large-scale natural disasters is not likely to reduce appetite for this kind of insurance.

In 2017, an exceptionally disastrous year, “cat bonds” issuance reached a total of 10 billion USD.

With interest rates at their lowest, investors have made recourse to natural disaster [4] bonds, a highly profitable activity in view of the risks sustained.

This infatuation is poised to continue in 2018 with a major operation amounting to 1.36 billion USD. This operation is carried out by the World Bank and it provides coverage against earthquakes in South America, namely in Chili, Colombia, Mexico and Peru.

It is noteworthy that a “cat bonds” plan is a kind of alternative insurance that enables insurers and reinsurers to cover themselves against natural disasters by transferring risks to investors (pension fund, financial institutions…).