(Bloomberg) — Bond buyers are betting more than ever on the mercy of Mother Nature as they seek to boost yields being suppressed by central banks.
Demand for notes linked to insurance against hurricanes and other natural disasters is prompting investors to accept the lowest relative yields in almost a decade for this time of the year, when the Atlantic storm season gets underway. Buyers are speculating that the $22 billion market can continue its streak without an annual loss even as Warren Buffett said last week that Berkshire Hathaway Inc. is avoiding writing hurricane insurance in Florida because premiums have been pushed too low.
Investors who have snapped up $5.76 billion of new catastrophe bonds this year, the fastest pace of issuance ever as measured by data provider Artemis, are being emboldened by weather forecasts and average annual returns of 8.5% since 2002. Offerings this year include a record $1.5 billion transaction linked to potential hurricane damage in Florida.
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