Rising Rates Could Help Reinsurers Better Price Climate Risk

The reach for yield has long been a boost for the catastrophe bond market, which acts as a backstop to the global insurance industry. But as economic conditions change and climate worries rise, taking on storm risk might become too much of a stretch for some investors.

Industry loss estimates for Hurricane Ian are still in flux, and in any event the actual loss tally won’t be settled for some time as litigation and claims adjustments play out. But at the forecast level of several tens of billions of dollars, reinsurance that sits behind primary insurers is set to kick in—as is “alternative capital” insurance such as so-called cat bonds.

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