Cat Bond’s Record 16% Drop Looks Overdone as Irma Weakens

Prices should recover as initial cost estimates related to damage seem too high

As Irma weakens, the insurance industry is breathing a sigh of relief. And that should also be reflected in prices for catastrophe bonds -- used by investors to bet against natural disasters -- too, writes Bloomberg Gadfly’s Marcus Ashworth. On Friday, the benchmark Swiss Re Cat Bond Price Return Index fell a whopping 16 percent, the most on record, as Hurricane Irma approached Florida. AIR Worldwide on Monday lowered its top estimate for U.S. insured damage from Irma to $40 billion from $50 billion, while data-modelling firm Enki Research cut its projection for total losses to $49 billion from $200 billion.

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