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The Business of Betting on Catastrophe
World Bank pandemic bonds paid out only after death tolls passed a threshold. They’re part of a booming market where investors turn calamity into capital.
Every autumn, for about 50 years now, 2,000-odd reinsurers take over the German town known for its curative hot spring spas, and a picturesque stone canal graced with impeccably pruned ivy, with white swans so big I wondered about steroids in the water. In the town typically thick with tourists, for four days each year, serious-faced, mostly white businessmen (5 to 1, men to women) rush around in dark suits and Oxford brogues, conferencing in buildings along the canal. Alternative risk transfer (ART) — the category of the global insurance industry that ILS falls into — emerged in the 1970s as a way for investors to provide an extra layer of financial protection, through additional diversification, for extreme weather and mortality events that threatened to bring down whole companies.
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