LONDON, April 20 (Reuters) - Catastrophe bond issuance rose 35 percent in the first quarter to a record $2 billion, insurance broker and consultancy Willis Towers Watson said on Wednesday, as investors continue to seek higher yields in a low-interest rate environment.
Investors such as pension funds particularly like the bonds as they are not correlated to other global financial markets. Investors’ principal remains safe as long as a specific natural disaster, such as a hurricane or earthquake, does not occur.
The majority of the new issues were tied to U.S. catastrophe risk, although some Japanese bonds were also issued, WTW said, leaving the sector on course to meet or beat 2014’s record $8 billion. A total of $7 billion was issued in 2015.
Most catastrophes which could act as a trigger for a major capital loss for investors are in the United States, but recent benign hurricane seasons there have kept losses low.
Earthquakes in southern Japan and Ecuador last week are not expected to trigger any bond defaults, Bill Dubinsky, head of insurance-linked securities at Willis Capital Markets & Advisory, told Reuters. (Reporting by Carolyn Cohn; editing by Simon Jessop)