Investors Are Gambling on Climate-Linked Catastrophes
“These market-driven solutions don’t quite cut it in the poorer parts of the world,” Bloomberg’s Gautam Naik, says on this week’s Zero.
A damaged mobile home park after Hurricane Milton in St. Petersburg, Florida on Oct. 10.
Photographer: Tristan Wheelock/BloombergWhen Hurricane Milton made landfall in Florida last Wednesday, it was a category 3 hurricane. As the storm battered central Florida, carrying away the top of the roof of the Tropicana Field stadium in St. Petersburg, it left millions of households without power. Early estimates put the cost of loss and damages as up to $75 billion.
One group of investors was watching Milton’s path with particular interest: Catastrophe bond investors. The market for specialized financial instruments designed to pay out in the event of hurricanes like Milton is worth $46 billion. In 2023 cat bonds were the most profitable strategy for hedge funds.