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‘Hole-in-One’ Cat Bonds Are Top Asset Eluding Quake’s Grasp

Catastrophe bonds may escape Japan’s worst earthquake mostly unscathed, outperforming stocks, commodities, junk-rated debt and the reinsurers they’re meant to protect.

Insurers and reinsurers typically sell cat bonds to help cover their most extreme risks such as an earthquake rocking Tokyo or a hurricane with the force of Katrina hitting the center of Miami. This month’s earthquake in Japan struck about 240 miles (380 kilometers) northeast of the capital, meaning investors may pay insurers less than 10 percent of the $1.7 billion of debt sold to help cover losses, said Niklaus Hilti, head of insurance-linked strategy at Credit Suisse Group AG.