Catastrophe bond market expands into new perils
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While the market for catastrophe bonds has long centered on risks from storms during the Atlantic hurricane season, it is increasingly embracing new perils.
Bill Dubinsky, New York-based head of insurance-linked securities at Willis Group Holdings P.L.C.'s capital markets and adviser group, said he sees opportunities for catastrophe bonds to play a bigger role in areas where insurance penetration is low or sufficient limits are unavailable, citing coverage for California earthquake risk as prime example.
“In California, you have a very limited pickup rate for large individual insureds, some of whom have multibillion-dollar exposures,” he said. “So there's a lot of room for expansion just within natural catastrophe.”
Moreover, Mr. Dubinsky said that some recent catastrophe bonds have contained coverage for disparate perils. The Queen Street VIII Re catastrophe bond completed by Munich Reinsurance Co. in July, for example, covers both U.S. hurricane risk and Australian cyclone risk.
“You are starting to see growth in new natural catastrophe perils and more multiperil transactions,” he said. “The economics of including things on a multiperil basis are much more appealing than on a standalone basis.”
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