Japan earthquake raises cat bond uncertainty

Lack of clarity over trigger points for existing catastrophe bonds affected by Japan earthquake leads to broader questions over ability of investors to accurately determine potential losses

Flooding in the immediate aftermath of the March 11 earthquake off Japan’s coast

The earthquake that struck off the east coast of Japan on March 11 has caused uncertainty over whether a number of catastrophe (cat) bonds will be triggered, and what the broader consequences will be for the market.

The Swiss Re Global Cat Bond Performance Price Return index, which tracks the price return for all outstanding US dollar-denominated cat bonds, declined considerably; closing on March 11 at 97.75 – a 0.51% drop from the previous week. The Global Cat Bond Total Return index, based on