Risky business: “Catastrophe bonds” and other securities where investors directly take on insurance risk in return for a premium are drawing the interest of the world’s biggest insurers, the FT reports. And although a spate of natural disasters in the last two years has brought with it investor losses, long-term sectoral growth is predicted, following the leap in investment in insurance-linked securities (ILS) — from USD 18 bn in 2009 to USD 93 bn in 2018.

The growth of “catastrophe bonds” and ILS: In the last couple of years, big insurers have displayed a particular appetite for merging with, acquiring or starting ILS managers, which are attractive partly because they enable the insurers to sell more insurance to customers by providing an extra source of capital. Just as importantly, they offer the insurer a different kind of business model. According to Gérald Harlin, chief financial officer of Axa, “It is like the originate to distribute model in asset management. It’s a fee business — it’s structuring risk.”