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Catastrophe Derivatives Demand Surges as Storm Season Nears

Insurance Journal – Demand for disaster derivatives is surging as insurers seek alternatives to scarce reinsurance and expensive catastrophe bonds, with the forthcoming North Atlantic hurricane season likely to give a further boost.

Prices are at record levels for Industry Loss Warranties (ILWs) and derivatives such as catastrophe futures, used by insurers to cover their potential losses from natural disasters.

"People are trying to purchase as much cover as they can, be they insurance companies in Florida or reinsurers in Bermuda, and obviously pricing has been driven up considerably," said Stephen Breen, Executive Vice President at Tradition Re, which brokers traditional reinsurance and catastrophe derivatives.

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