Sub-prime comparison not fair to catastrophe bonds
Friday, 05 15 2015, Category: Insurance and Reinsurance, Country: World
The recent comparisons that have been made between catastrophe bonds and sub-prime, or toxic, mortgage-backed securities, are unfair to the cat bond market, where to date the bundling of non-transparent risks is not an issue, according to John Seo.
The Co-Founder and Managing Principal of specialist insurance-linked securities (ILS) and catastrophe bond investment manager Fermat Capital Management, Dr. John Seo, has responded to recent reports where parallels have been made between cat bonds and sub-prime mortgage securities.
There have been recent criticisms that catastrophe bonds contain complex, non-transparent bundles of reinsurance risk. Seo notes that the reinsurance market does feature opaque instruments and therefore “it is easy to see how market commentators are piecing together snippets of information to draw hard conclusions on industry developments.”