Hurricane Ivan has prompted the Wall Street Journal to publish an article about catastrophe bonds:

“Cat bonds first began to appear in the 1990s after insurers and reinsurers suffered financially from storms such as Hurricane Andrew that struck Florida in 1992 and the Northridge Earthquake that hit California in 1994. From 1989 to 1995, total insured property losses in the U.S. were $75 billion, 50% more than the property losses from the prior 40 years, according to Standard & Poor’s.”

They omit from the history lesson that cat bonds weren’t actually issued for earthquakes at that point because Warren Buffett had one of his companies issue insurance policies. Cat bonds did catch on, though:

“Reinsurance giant Swiss Re, for example, is a major issuer of catastrophe bonds. A year ago, under its Arbor program, Swiss Re issued six catastrophe bonds with four-year maturities and total protection for Swiss Re of $205 million.”
September 13, 2004
“Investors Who Bet On Storms, Disasters Gauge Trade Winds,”
By CARRICK MOLLENKAMP and CHRISTOPHER OSTER
Staff Reporters of THE WALL STREET JOURNAL

Still, nobody is as yet issuing cat bonds for Internet outages, even though a single Internet worm could cost more than all three of Hurricanes Charley, Frances, and Ivan combined.

-jsq