Reduced risk boosts cat bonds

The Swiss Re Cat Bond Price Return Index rose for the sixth week running to 90.56 as investors bet insurers are less likely to claim as the hurricane season looks calm, Bloomberg reports.

“If you don’t have any hurricanes threatening the US, the investor base gets a lot more comfortable with owning these securities in hurricane season,” said Brett Houghton, a fixed- income trader at Rochdale Securities. “There is the perception of reduced risk profile of the bonds.”

Bloomberg said El Nino, which produces warmer water in the eastern Pacific Ocean, is expected to reduce the severity of storms in the Atlantic.

There have been about $1.8bn in new cat bonds and investments “accelerated over the past two months with the broader opening of the wider capital markets,” said Judy Klugman, managing director at Swiss Re in New York.