Getting rich by betting on a future catastrophe? Thanks to something known as "catastrophe bonds” or "cat bonds” for short, this is now possible. A financial tool that trades on suffering and misery.
In the world of big financial investments, there’s a market for pretty much anything. Including for future catastrophes, caused by natural disasters and other factors. So-called "cat bonds” speculate on the probability of a disaster occurring, and bet on how much damage it could cause. After all, climate change is happening and its consequences - devasting forest fires, flooding and tornadoes - are becoming increasingly difficult for conventional insurers to handle. In response, the market for catastrophe bonds is growing.
Following the huge damage caused by hurricane Sandy over 10 years ago, cities like New York invested in cat bonds to protect themselves against the risks of future catastrophes. But how exactly does this market work? And what about those who can’t afford to insure themselves against potential disasters such as these?
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