LONDON (Reuters) – The market for catastrophe bonds has boomed in the past year and is likely to keep growing as investors search for higher returns.
The volume of outstanding bonds is set to reach $15 billion this year, a near 30 percent increase from 2011, say investors. Sales of new bonds doubled in the first six months of 2012, falling just short of 2007's record for first-half issuance, according to Swiss Re.
Known widely as cat bonds, these securities are typically issued by big reinsurers to cover a low-probability, high-loss event, such as a destructive hurricane, thereby freeing up capital and allowing them to underwrite more basic business.
The latest trend is for big primary insurers and U.S. publicly funded disaster agencies to issue them as well.
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