Overview

Investors across the globe are struggling to generate returns in a world of sub-zero interest rates. Macroeconomic events have the potential to shock financial markets from equities to corporate or government bonds alike. The traditional methods of portfolio diversification are failing in a world characterized by unprecedented liquidity injections from central banks. Cat bonds offer a viable alternative: Their performance is linked to the occurrence of natural catastrophes, such as hurricanes or earthquakes, instead of corporate profits or stock market sentiment. Family offices and leading institutional investors are shifting billions of assets into these little-known instruments thus effectively becoming competitors to the traditional providers of reinsurance coverage. With steady returns of more than 7% per annum over the past twenty years, cat bonds have proven their resilience many times. This book takes the reader through the history of the asset class, outlines the basic structure and economics before demonstrating the benefit of adding a cat bond allocation to a traditional multi-asset portfolio.

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