Cat bonds set for boom year as new investors eye market

Despite a subdued level of activity in 2011, the cat bond market is expected to boom this year as new investors pile in and rates harden in the traditional reinsurance market. Thomas Whittaker reports on how the cat bond market is evolving

The financial markets have experienced their fair share of dark moments through the past few years, with the sovereign debt crisis only the latest drama to contend with. Meanwhile, the reinsurance industry itself has been plagued by a year of global natural catastrophes that will cost the insurance industry over tens of billions of dollars. But within this gloomy environment one set of assets has remained relatively unscathed.

Last year catastrophe (cat) bonds, which are designed to transfer