Staying out of harm's way

Catastrophe Bonds

As hurricane Gustav raced towards the US Gulf coast in late August, catastrophe bond investors held their breath. Three years after the devastation wreaked by hurricane Katrina, there were fears another event of similar magnitude could trigger principal losses on bond holdings. As it turned out, hurricane Gustav was quickly downgraded to a category one storm after making landfall in Louisiana on September 1, with early indications suggesting total losses would be a fraction of the $125 billion