FICC Focus Catastrophe Bonds & Extreme Events With Man AHL: Credit Crunch
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Feb 18, 2025 Tarek Abou Zeid, a partner and portfolio manager at Man AHL, brings his expertise in catastrophe bonds to the discussion. He dives into the fascinating world of cat bonds, exploring their rise following natural disasters and their role in diversifying investment portfolios. Real-world examples, from Hurricanes Andrew to the FIFA World Cup’s insurance strategies, highlight their innovative use in risk management. The conversation also touches on the dynamic between primary and secondary markets, as well as the promise of advanced technology in bond analysis.
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Origins of Cat Bonds
- Events like Hurricane Andrew and the Exxon Valdez oil spill revealed reinsurance capacity limits.
- This led to the creation of catastrophe bonds to access capital markets.
Cat Bond Market Growth
- The catastrophe bond market has grown significantly, from $33 billion in 2020 to around $50 billion currently.
- Growth is driven by peak perils like US wind and quake, with cyber emerging.
Cat Bond Deal Sizes
- Cat bonds range from $30-500+ million, with smaller deals often handled privately.
- Public bonds (144A) offer broader investor reach but higher setup costs.