LONDON (Reuters) – Munich Re said it was considering launching a fund to allow investors to buy catastrophe bonds and other insurance linked securities (ILS) to build on the growing demand for the instruments that are linked to natural disasters.

Insurers and reinsurers have used the instruments since the 1990s to manage their exposure to hurricanes, earthquakes and other calamities, by transferring potential losses to investment funds.

Investors receive a high rate of interest but risk losing all or part of their principal if a catastrophe occurs.

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