The impact of the financial crisis and natural catastrophes on CAT bonds

M. Gürtler, M. Hibbeln and C. Winkelvos

No IF40V1, Working Papers from Technische Universität Braunschweig, Institute of Finance

Abstract: CAT bonds are important instruments for the insurance of catastrophe risk. Due to a low degree of deal standardization, there is uncertainty about the determination of the CAT bond premium. In addition, it is not apparent how CAT bonds react after the financial crisis or a natural catastrophe. We empirically verify which factors determine the CAT bond premium and what effects arise if a catastrophe occurs. On a broad data set using secondary market premiums we find strong evidence that the recent financial crisis has a significant impact on CAT bond premiums. Furthermore, we find that after hurricane Katrina an increased risk perception for hurricanes can be observed.

Keywords: CAT bonds; financial crisis; catastrophe events; risk premium (search for similar items in EconPapers)
JEL-codes: G01 G22 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tbsifw:if40v1

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