Investors Find Nature Safer Than Economy; Bonds against Earthquakes, Hurricanes and Such Grow in Popularity as a Safe Haven from Market

The Washington Times (Washington, DC), October 11, 2011 | Go to article overview

Investors Find Nature Safer Than Economy; Bonds against Earthquakes, Hurricanes and Such Grow in Popularity as a Safe Haven from Market


Byline: Tim Devaney, THE WASHINGTON TIMES

So-called catastrophe bonds, a backup plan designed to protect insurers from the costs of Mother Nature's worst visitations, are getting new attention from investors following the recent wave of earthquakes, floods, tropical storms and other natural disasters.

Investors, turned off by the turmoil in the financial markets, are instead taking their chances and betting against natural disasters like earthquakes and hurricanes. Most of the time, they get good returns on their money. If a catastrophe strikes, though, they can lose everything.

Ironically, catastrophe bonds, or cat bonds, are considered a relatively safe gamble compared to the volatile financial markets of late. For investors seeking shelter from the wild swings on Wall Street, the U.S. debt downgrade and the euro crisis savaging Europe, catastrophe bonds represent a move to diversify into a market facing completely unrelated risks.

The financial markets tanking don't increase the possibility that there's going to be an earthquake, said Judy Klugman, managing director and head of insurance-linked securities distribution at Swiss Re, a reinsurance company that issues catastrophe bonds for its client insurers. Investors are just generally nervous about everything that's going on in the financial world. Right now, they think this is a safe haven. They don't know where else to put their money.

The $11.5 billion cat bond market is still small compared to the global corporate bond market of $7.5 trillion, according to John Forney, managing director of public finance at Raymond James & Associates Inc.

But demand is growing, and the catastrophe bond market has jumped 2.8 percent since Hurricane Irene made landfall in late August.

Swiss Re is trying to increase of the size of the market so it can pay interest rates for the bonds it sells. As you create more and more demand, Ms. Klugman said, the spread will go down.

The task is becoming easier for Swiss Re because demand is up, as, it appears, is the supply of disasters to pay for.

The tab in New Orleans from Hurricane Katrina was enormous. More recently, Japan was ravaged by an earthquake, a tsunami and a nuclear meltdown, while deadly tornadoes ripped through Joplin, Mo. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Investors Find Nature Safer Than Economy; Bonds against Earthquakes, Hurricanes and Such Grow in Popularity as a Safe Haven from Market
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.