Investing in Hurricanes: A Concise Introduction to Reinsurance, Catastrophe Bonds, and Insurance Linked Funds

Reinsurance is not complicated but it is full of jargon. This 50 page booklet introduces the key ideas that are necessary to make an informed investment in insurance linked funds. Introduced by the former partner responsible for the Goldman Sachs catastrophe bond business, the guide systematically explains the funds and their underlying assets. Alternative asset classes promise investors opportunities to generate returns that are weakly correlated to the debt and equity markets. Hedge funds, REITS and commodity funds as well as niches such as wine, art and stamp funds all promise absolute returns that are independent of the stock market. But we live in an interconnected world and experience has shown that, in stressful times, all of these strategies are affected by what is happening in the rest of the economy. Insurance linked funds have experienced rapid growth in recent years by successfully making the argument that catastrophe reinsurance is an asset class that is less correlated than most. Whilst a financial collapse might cause people to buy less wine, stamps or art it won't cause a hurricane, earthquake or tsunami.