INSIGHT: Implications of Covid-19 for Catastrophe Bond Litigation

July 17, 2020Bloomberg Law

Catastrophe bonds, used by those with insurance or reinsurance obligations to sell some of their exposure to losses from cataclysmic events, are increasingly likely to hit their triggers for payouts as the Covid-19 pandemic continues. Patterson Belknap attorneys examine issues that could cause investors to lose principal, potential sources of future disputes and litigation, and steps to mitigate risks.

As a direct effect of the ongoing pandemic, we now see an impact in a growing but little-known area of the capital markets: catastrophe bonds.

The spread of Covid-19 in developing countries recently triggered a payout of over $100 million from one such catastrophe bond offering sponsored by the World Bank—known as a “pandemic bond”—wiping out the investment of noteholders in its riskier tranche.

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