{"id":86181,"date":"2024-08-20T00:00:00","date_gmt":"2024-08-20T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/climate\/2024\/08\/20\/critics-scrutinize-catastrophe-bonds-for-unfairly-benefitting-investors\/"},"modified":"2024-08-20T00:00:00","modified_gmt":"2024-08-20T00:00:00","slug":"critics-scrutinize-catastrophe-bonds-for-unfairly-benefitting-investors","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/climate\/2024\/08\/20\/critics-scrutinize-catastrophe-bonds-for-unfairly-benefitting-investors\/","title":{"rendered":"Critics scrutinize catastrophe bonds for unfairly benefitting investors"},"content":{"rendered":"

Cat <\/strong>bonds are under scrutiny: <\/strong>Catastrophe bonds \u2014 also known as cat bonds \u2014 which have delivered investors significant returns with an average of 15% last year, are in the spotlight amid claims they are \u201cunfairly benefiting investors at the expense of certain issuers,\u201d Bloomberg<\/a> reports. The concern about the fairness of these bonds\u2019 terms comes after Jamaica\u2019s cat bond was not paid out despite Hurricane Beryl\u2019s recent devastating impacts<\/a>.<\/p>\n

(** Tap or click the headline above to read this story with all of the links <\/strong>to our background as well as external sources.)<\/p>\n

REFRESHER- What are cat bonds? <\/strong>Cat bonds are high-yield debt instruments<\/a> designed to help ins. companies raise money in the event of a natural disaster. They are also frequently used to mitigate the effects of climate change \u2014 which can exacerbate and increase the frequency of some natural disasters \u2014 by transferring a specified set of risks from a sponsor, typically an ins. company to investors. The USD 47 bn catastrophe bond market was at the heart of the highest-returning hedge fund strategy last year with a 20% value increase.<\/p>\n

The basis for scrutiny:<\/strong> The Jamaican government\u2019s USD 150 mn cat bond \u2014 arranged by the World Bank \u2014 narrowly missed the payout threshold due to specific air pressure parameters, Bloomberg adds. This outcome has sparked debate among Caribbean leaders, who are calling for a review of the triggers that determine payouts. Critics argue that the rigid terms protect investors but expose vulnerable nations to catastrophic risks.<\/p>\n

The outlook: <\/strong>The market for catastrophe bonds continues to grow, driven by factors such as climate change and population density. While investors are attracted to the high returns and the chance to diversify their portfolios, the World Bank warns that allowing cat bonds to be paid out more easily would increase their cost. Some countries are reconsidering their use of catastrophe bonds, such as the Philippines who chose not to renew its cat bond in favour of an indemnity insurance program<\/a>. <\/p>\n","protected":false},"excerpt":{"rendered":"

The Jamaican government\u2019s USD 150 mn cat bond, arranged by the World Bank, narrowly missed the payout threshold due to specific air pressure parameters<\/p>\n","protected":false},"author":1,"featured_media":86182,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"newspack_ads_suppress_ads":false,"newspack_popups_has_disabled_popups":false,"newspack_sponsor_sponsorship_scope":"","newspack_sponsor_native_byline_display":"inherit","newspack_sponsor_native_category_display":"inherit","newspack_sponsor_underwriter_style":"inherit","newspack_sponsor_underwriter_placement":"inherit","ep_exclude_from_search":false,"_primary_brand":0,"newspack_featured_image_position":"","newspack_post_subtitle":"","newspack_article_summary_title":"Overview:","newspack_article_summary":"","newspack_hide_updated_date":false,"newspack_show_updated_date":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[157],"tags":[156,11,164],"brand":[],"newspack_spnsrs_tax":[],"class_list":["post-86181","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-climate-in-the-news","tag-climate-in-the-news","tag-enterpriseclimate","tag-green-finance","wpautop","entry"],"acf":{"mongo_id":"6086dc3e-c656-4b5f-8992-96847c068580","order":"9","is_powered_by":false,"story_type":"1","photo_url":"https:\/\/ent.news\/2024\/5\/2600.jpg","photo_position":"above","homepage_title":"","full_issue_title":"Critics scrutinize catastrophe bonds for unfairly benefitting investors","related_issue":[86165],"teaser":"The Jamaican government\u2019s USD 150 mn cat bond, arranged by the World Bank, narrowly missed the payout threshold due to specific air pressure parameters","voice_url":"https:\/\/s3.us-east-1.amazonaws.com\/ent.news\/audio\/2024\/8\/.d1b12ffd-d2a6-487d-86ed-e4d03c46daca.mp3"},"yoast_head":"\nCritics scrutinize catastrophe bonds for unfairly benefitting investors - Climate<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterpriseam.com\/climate\/2024\/08\/20\/critics-scrutinize-catastrophe-bonds-for-unfairly-benefitting-investors\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Critics scrutinize catastrophe bonds for unfairly benefitting investors\" \/>\n<meta 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