Indian government says ‘use catastrophe bonds’

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The Indian government finance minister announced the 2009-2010 Economic Survey results this week. This annual survey looks at how the economy is progressing and suggests the governments ideas for ways to further stimulate and mature the quick growing financial markets in India.

This year the survey specifically cited catastrophe bonds as an instrument that it would be desirable to introduce into India. They see catastrophe bonds as a great way to help their insurance companies transfer their catastrophe risks off balance-sheet and into the hands of advanced institutional investors.

The idea was welcomed by Indian insurance companies who are already involved in creation of alternative insurance products in areas such as weather and crop micro-insurance. The desire there is to utilise alternative methods to transfer risks to capital markets as much as possible and our contacts there suggest that an exchange traded mini-catastrophe bond may be a viable product in India.

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