Swiss Re Insurance-Linked Fund Management

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The catastrophe bond triggers utilised in transactions to date


Catastrophe bond transactions can utilise a range of different types of triggers as points of measure to define whether they have experienced a loss or not. The types of triggers used by cat bond deals have changed over the years the market has existed as some come into favour and others receive less attention. A previous post on Artemis discusses the catastrophe bond triggers used by year up to the end of 2008.

Swiss Re’s recently published insurance-linked securities market update contains a really good graphic which shows the split between the different trigger types since the market got underway. It’s interesting to see how the market is composed and these graphs will be good to refer back to in future years to see how things evolve. Indemnity triggers still dominate the market for cat bonds but other trigger types such as modelled loss have gained favour in recent years and we expect to see the split even out more over coming years.

There is also the possibility of new hybrid triggers gaining favour amongst issuers as we know that research is always ongoing into the best way to create transparent trigger mechanisms.

Triggers used by catastrophe bond transactions (as of 31 July 2010)

Triggers used by catastrophe bond transactions (as of 31 July 2010)

You can download the full insurance-linked securities market update from Swiss Re here.

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