Cat bonds find their calling

With the fallout from the subprime crisis causing devastation across the credit markets, investors are looking for diversification, low correlation and attractive yields. For a growing number, the answer lies in the catastrophe bond market. Wietske Blees reports

Investors have shrunk back from the securitisation market since August, anxious about possible exposures to subprime mortgages in structured finance portfolios. New issuance has ground to a halt in some classes of asset-backed securities (ABSs), while liquidity in the secondary market has all but dried up. A few sectors, however, have continued to show strong growth, as investors scramble around to find assets that are uncorrelated with traditional credit instruments. One of the main