Abstract
Significance As an alternative source of capital to traditional reinsurance, catastrophe (cat) bond issuance, a securitised type of insurance against catastrophe-linked losses, is reaching new highs. In the current low interest rate environment, there has been strong investor demand for these bonds. Impacts As natural disasters increase, the chance of a catastrophe occurring in these bonds' three-to-five-year lifespan rises, weighing on returns. If the number of natural disasters with a global impact rises, cat bond returns may become more correlated with other asset classes. More catastrophe bonds that meet ESG criteria are likely to be issued.
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