Staying out of harm's way

The catastrophe bond market has so far been immune to the credit crisis, highlighting the product's lack of correlation with other structured finance instruments. A wider number of investors have expressed interest in the asset class, but will issuance levels keep up with demand? By Ryan Davidson

As hurricane Gustav raced towards the US Gulf coast in late August, catastrophe bond investors held their breath. Three years after the devastation wreaked by hurricane Katrina, there were fears another event of similar magnitude could trigger principal losses on bond holdings. As it turned out, hurricane Gustav was quickly downgraded to a category one storm after making landfall in Louisiana on September 1, with early indications suggesting total losses would be a fraction of the $125 billion