Hedge funds and insurance-linked investments
Insurance-linked securities funds give investors exposure to insurance risk, most often natural catastrophes, through instruments such as catastrophe bonds, collateralized reinsurance and industry loss warranties.
Investors are attracted by returns that are largely uncorrelated with financial markets. The start of the hurricane season is a key period for these funds, as capital is deployed into new contracts.
For the reinsurance market, this alternative capital adds capacity and competition. It also means that pricing is increasingly influenced by investor appetite as well as by traditional reinsurers.