There has been a lot of press recently on the growth of the catastrophe bond market.  Investors, in particular pension funds, are jumping in seeking attractive yields and potentially greater diversification.  How well do investors understand catastrophe bonds?  Are they the “free lunch” they appear to be?

This post examines three aspects of catastrophe bonds:

• Catastrophe bonds and how they work

• Typical returns on catastrophe bonds

• Risks

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