Newspaper article The Evening Standard (London, England)

Catastrophe Bonds a Disaster? Time Will Tell

Newspaper article The Evening Standard (London, England)

Catastrophe Bonds a Disaster? Time Will Tell

Article excerpt

Byline: Anthony Hilton city comment

HURRICANE Katrina, the storm that devastated New Orleans, hit the city 10 years ago in late August 2005. It has been quiet, eerily quiet, in the West since then. Asia has suffered some dreadful weather-related events but those countries are often a lot less heavily insured both in absolute terms and in the Western markets.

The absence of disasters means the insurance industry continues to prosper in what is not an easy climate. Hiscox produced figures yesterday that were excellent, given the flatness of insurance premiums around the world and the difficulty of investing premium income profitably in a world of low returns.

Hiscox is, however, a remarkably well-run business one of the best in the London insurance market. But even there, people must be beginning to wonder when the wind is going to blow again and what will happen when it does.

This is a question vexing a lot of people, not least the Bank of England, because one of the features of the last quiet decade has been the growth of catastrophe bonds, which are investments that pay out in the event of a hurricane but otherwise earn a much higher rate of interest than can easily be got elsewhere. …

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