ESG & Investing
Catastrophe-Bond Funds See Risk Premiums Rising After Milton
- Estimate comes even as cat-bond losses lower than anticipated
- Cat-bond investors have so far dodged major losses this season
Debris from damage caused by hurricanes Helene and Milton in St. Pete Beach, Florida, on Oct. 11.
Photographer: Tristan Wheelock/BloombergThis article is for subscribers only.
The cost of issuing catastrophe bonds looks set to go up, as asset managers who specialize in the securities react to the fallout from Hurricane Milton.
Though cat-bond portfolios will likely see a much smaller dent than initially estimated after Milton, “every loss withdraws risk-bearing capital from the market and reduces reinsurance capacity,” Plenum Investments Ltd. told investors in an emailed update on Saturday. As a result, “risk premiums in the cat-bond market are likely to increase again” from what’s already an “historically high level,” it said.