How Cat Bonds Have Fared During Catastrophic Events

Cat bonds have faced a handful of default-triggering events over the years, and several have been connected with events that experienced significant losses.

But even during periods where peril events have occurred, the cat bond market has demonstrated the ability to recover rapidly in these instances, as reflected in the historical performance and drawdowns of the Swiss Re Global Cat Bond Index.

Additionally, cat bonds have exhibited durability over time—even through tumultuous market periods. We believe this attribute is due to their ability to provide diversification by way of low correlations to the financial markets.

Obviously, there is always the potential of catastrophic events that could trigger sharper drawdowns, yet even with such a possibility, we believe cat bonds can still serve as diversifiers, because different cat bonds cover different perils, which are typically uncorrelated to one another due to the nature of trigger events across geographies.

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