Recovering from 'Hurricane Lehman'

The collapse of Lehman Brothers tested the assertion that catastrophe bonds offer investors complete diversification from other financial asset investments. Nonetheless, improvements to the structure of cat bonds along with their relative outperformance compared with other asset classes, has resulted in a raft of participants pushing these products in Asia. Duncan Wood reports

Few, if any, asset classes have survived the financial crisis with their reputations among investors intact. But the catastrophe bond market stood a better chance than most due to its claimed lack of correlation with more traditional asset classes.

Put simply, the events that wreaked havoc for equities, credit, currencies and commodities have no bearing on whether an earthquake is going to hit Tokyo or a windstorm wreck European towns and cities. That argument remains true today - but the market