Catastrophe bonds, which allow insurers to pass on risk to capital markets, are attracting retail investors seeking higher returns. The market for these bonds, known as cat bonds, has grown 12% this year to a record $12 billion, with European UCITS funds driving the increase. While cat bonds offer attractive yields, they also come with high risks, including the potential for substantial losses in the event of a natural disaster. As regulators monitor the market, asset managers are adjusting their portfolios in anticipation of an active hurricane season.
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