Investing in Disasters, Hurricane Edition

Today’s report is a timely one as Hurricane Sandy bears down on our friends on the eastern seaboard (we’re thinking about you, please be safe!).  Investing in, and hedging out, natural disaster risks has always been a fascination to me.  I did a post on catastrophe (“cat”) bonds back in 2007 on my blog, and an easy primer on the space is the always great Michael Lewis’s “In Nature’s Casino“.

Recent headlines:

Artemis (best resource)
Sandy threatens billion dollar losses, could threaten catastrophe bonds

Cat Bond Returns Accelerate as ‘Frankenstorm’ Bears Down
Cat Bonds Drop Most Since February as Storm Barrels Toward Coast

There are not a lot of choices for investing in the cat bond space, at least through public funds.  GAM FCM has a cat bond fund, and PIMCO and Pioneer both have funds that invest in cat bonds but are not the main focus for the fund.  Both Artemis and Swiss Re track cat bond indexes.

For those unfamiliar with cat bonds, below is a list of resources and really good reads on the space.


Do Financial Markets Reward Buying and Selling Insurance and Lottery Tickets?


An Introduction to Cat Bonds

2012: A compelling outlook for catastrophe bonds

Cat Bonds – Investment Case 

GAM Star Cat Bond – Fund Information Sheet

Hedge Fund Journal interview with Dr John Seo

AIR Worldwide
Top 10 Historical Hurricanes and Earthquakes in the U.S.: What Would They Cost Today?  


Cat Bonds Demystified

And for a little perspective, here is a chart from that AIR Report: