Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Institutional investors pouring cash into catastrophe bonds


Institutional investors seem to be increasingly confident about the cat bond market as they start to pour funds back into the asset class. After the blip in the market caused by the failure of Lehman Brothers the market appears to be back in favor as investors realise that the returns and low correlation still make it an attractive place to be.

Nephila Capital are one of the success stories of the year as they announce that they have raised around $980m from institutional investors seeking to put their money into catastrophe bonds in the second quarter of this year. Greg Hagood, co-founder of Nephila Capital, says the investors range from pension funds, to hedge funds and fund of funds, all are said to be seeking non-correlated investments such as cat bonds and insurance linked securities.

More encouraging signs of the health of the market; when investors return in droves it can help to drive prices down a little as demand increases, which in turn could help issuers get new transactions off the ground which is currently proving tricky due to price.

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