Investors pumped $1.2 billion into catastrophe bonds in the first quarter of this year, dramatically increasing what amounts to a bet on a mild hurricane season this summer.
Verisk's Property Claim Services, in a quarterly report, said the amount issued was up 37 percent over the same period last year, making for the third-largest quarter in "cat bond" history.
Catastrophe bond investors receive interest payments in exchange for buying bonds that are sponsored by insurers and linked to specific events, such as hurricanes hitting the Gulf Coast or earthquakes striking California.
If one of those disasters does happen and the insurer's losses exceed a certain amount, the investors' principal can be wiped out. Yet the bonds are increasingly popular because they are considered "uncorrelated"—in other words, not tied to the usual forces that move financial markets, like interest rate swings and economic growth.