As the catastrophe bond market continues to evolve, the inclusion of non-natural catastrophe risks like terrorism could become increasingly appealing to insurance-linked securities (ILS) investors seeking to optimise their portfolios, according to Man Group.
In a recent commentary, global independent alternative and active investment management firm Man Group highlighted how the cat bond market is primarily dominated by the peak perils of US wind and quake, however, the firm notes that extending beyond these two risks can help “improve diversification and tail characteristics in a portfolio.”
While traditional cat bonds have primarily focused on natural catastrophe events like hurricanes and earthquakes, the inclusion of non-natural catastrophe risks, such as terrorism, cyber threats, and pandemics, has been a more recent development that’s been seen across the cat bond market.
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