Pension Funds and Catastrophe Bonds: What Could Possibly Go Wrong? - Businessweek
Ed Noonan is frustrated. He’s chief executive officer of Validus Holdings (VR),
which manages an investment portfolio of insurance-linked securities,
among other things. These are more frequently referred to as
“catastrophe bonds”; in the event of a natural catastrophe, they offer a
return but lose their principal to pay for insurance losses. Validus is
being undercut in this market by fund managers who are, according to
Noonan, no longer behaving rationally. From an earnings call last week
in which he discussed the market for catastrophe bonds covering
hurricane risk in Florida:
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