Major catastrophe unlikely to detract insurance-linked securities investors

Backers say the insurance-linked securities space is not likely to suffer a major catastrophic event, despite some detractors' concerns.

Indeed, a substantial catastrophe loss could attract more funds, experts say.

“I don't think a loss event or two will drive investors away,” said Gary Martucci, a director at Standard & Poor's Corp. in New York.

Should there be a significant loss event, which he said would be on the order of Hurricane Katrina, which resulted in insured losses in excess of $50 billion, standard insurance rates likely would increase and attract more capital to the sector.

“There is also a lot of money available to quickly come in after an event,” said Bill Dubinsky, head of ILS at Willis Capital Markets & Advisory in New York.

“If investors walk after an event, others will replace them,” said Asha Attoh-Okine, managing senior financial analyst with A.M. Best Co. Inc.'s ILS group in Oldwick, New Jersey.

“This market is here to stay even with a big insured event” that would cost tens of billions of dollars, Mr. Attoh-Okine said.