Katrina sparks model rethink

Demand for catastrophe bonds is unlikely to wane following the impact of Hurricane Katrina in August, despite question marks raised about hedge funds' appetite for taking on catastrophe risk in the aftermath of the disaster.

"We remain bullish on the cat risk pipeline remaining robust," says Judith Klugman, a managing director responsible for sales and marketing of insurance-linked securities and asset-backed securities at Swiss Re in New York. "Hedge funds are now a very active participant. They are fully committed and we expect them to participate for the long term."

Estimates of insured losses arising from Hurricane Katrina – which hit the Gulf Coast on August 29 – have ranged from $25 billion–60 billion. The