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Cat bond spreads adequately compensate for hurricane risk: Twelve Capital

Investment manager Twelve Capital feels that the spread being taken when investing into catastrophe bonds compensates for the shorter-term risk being taken from the hurricane peril, noting that pricing of cat bonds is based on a longer-term view than just a single hurricane season.

With hurricane forecasts suggesting a hyperactive 2024 Atlantic storm season with potentially elevated US landfall risks, specialist insurance-linked securities (ILS) and reinsurance linked investment manager Twelve Capital has commented on how it thinks about the risks faced by its portfolios of cat bonds and other instruments, when the hurricane forecasts are calling for a particularly active year.

In summary, Twelve Capital believes that, “In heightened seasons, there is no clear signal in the data regarding tail events impacting Cat Bonds due to the random nature of events.”


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