Quiet hurricane season means big profits for catastrophe bondholders

[derby378]

Investors who bet against the odds of another devastating Atlantic hurricane season now stand to cash in big-time on "catastrophe bonds." Contrary to expert predictions, the season turned out to be the mildest in years.

Insurance companies sell the bonds, yielding interest rates of about 15%, to help them absorb huge payouts in the event of another storm like Hurricane Katrina.

The risk is high: If a storm causes major damage during a bond's term, all the investment, including the capital, can go back to the insurer to cover the cost of recovery.

But as the mildest hurricane season in a decade winds down, hedge funds and other investors that bought the securities stand to make a mint. The hurricane season, which began on June 1, ends on Nov. 30. Not a single hurricane has hit the U.S. mainland.

http://www.usatoday.com/money/industries/insurance/2006-11-18-catastropheprofits_x.htm?csp=26

[bullimiami]

1. the rigged insurance game insures they make money all of the time.

and anytime they have to pay out more than they like, they just bilk it from the customers.

either they make a profit or a windfall profit.

why were they allowed to pass the losses (or reduced profits) of last year and are not required to pass back the savings of this year?