Global catastrophe bond issuance is expected to surge 11% in the January-June period on the year to about 3.8 billion dollars (about 370 billion yen), the largest amount on record on a half-year basis.
On an annual basis, the amount of newly issued catastrophe bonds around the world is also on course for a record high.
Catastrophe bonds, also known as cat bonds, are issued primarily by insurance companies to reduce risks involved with insurance payouts in the event of massive natural disasters.
Cat bond investors receive principal and interest if a catastrophe does not occur before the bonds mature. If a catastrophe happens before the bonds mature, part or all of the money invested is used to settle insurance claims.
Many nonlife insurers aggressively issue cat bonds in response to the growing number of hurricanes and other natural disasters around the world.
Cat bonds do not correlate with the stock market and other financial markets and are attracting growing attention from investors who want to diversify their portfolios.
According to U.S.-based reinsurance broker Guy Carpenter, global cat bond issuance jumped 42% in 2012 from the previous year to about 5.852 billion dollars.
In 2013, the amount of newly issued cat bonds around the world is expected to top the annual record of about 6.996 billion dollars set in 2007.
Cat bonds have been issued by insurance companies affiliated with the states of Florida and North Carolina in the United States, as well as by private insurers.
In Japan, Mitsui Sumitomo Insurance Co. issued 130 million dollars worth of cat bonds last year to reduce risks related to typhoons, while National Mutual Insurance Federation of Agricultural Cooperatives also once issued 300 million dollars of cat bonds for the possibility of massive earthquakes.