USAA’s new meteor catastrophe bonds could pay as much as 15%. And should you find yourself holding them when the big one hits, who cares? There’s no guarantee civilization will survive anyway.

United Services Automobile Association, an insurer, is poised Thursday to issue the first ever catastrophe bond that will hinge in part on space rocks hitting the U.S….

The riskiest tranche of USAA’s four-year bond–the chunk that would suffer losses sooner than others–is expected to yield about 15%, according to a person familiar with the matter. The issue will raise a total of about $130 million.

On the other hand, it isn’t exactly all free money or extinction.

While the risk of catastrophic meteorite damage might be remote, investors could also lose money on the USAA’s bond in the event of earthquakes, volcanic eruptions, wildfires and various storms and cyclones in any of the 50 U.S. states….

“Meteorite risk is a very remote risk, and therefore as an investor we hardly get any compensation for it,” said Daniel Ineichen, a fund manager at Schroders, whose funds manage more than $1.4 billion of insurance-linked assets. “We prefer traditional risks that you can model for.”

Meteor Bonds. Oh Yes. [WSJ MoneyBeat blog]

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Comments (10)

  1. Posted by Guest | May 27, 2014 at 10:15 AM

    Shaz, I'm going to give credit where credit's due. Your mouse overs are getting much, much better and I'll even laugh from time to time. Now think about the possibilities if you spent as much time on the content of your stories as you did finding the perfect Google image…

    - Positive three-day weekend Guest

  2. Posted by UFOinsider | May 27, 2014 at 10:45 AM

    “We prefer traditional risks that you can model for.”

    ….then turns around and tells investors he's trying to maximize alpha. God this industry is fucked.

  3. Posted by Quant me maybe... | May 27, 2014 at 10:49 AM

    Personally, I favor the business of providing atheists to watch 'true believer's dogs' after the Rapture.

    > I personally would offer that insurance for $100/year per dog. Bet there should be a $.99 app for that, too They could check-in from heaven.

  4. Posted by Gas Daily Daily | May 27, 2014 at 10:50 AM

    Here's another little known fact you'll be interested in:

    The reason hemorrhoids are called "hemorrhoids" is because "asteroids" was already in use.

  5. Posted by AIG MegaCat Quant | May 27, 2014 at 11:05 AM

    In the 1991 hit "Doc Hollywood", Woody Harrelson's character "Hank Gordon" floated the idea of selling earthquake insurance in California and if "the big one" ever hit, he'd take the premium money and retire.

  6. Posted by Shaz | May 27, 2014 at 11:17 AM

    Thaks mom!

  7. Posted by Guest | May 27, 2014 at 11:27 AM

    Any insurance for repetitive-stress injuries?

    - Shaz' Ctrl + C, Ctrl +V keys

  8. Posted by ModifyMuch? | May 27, 2014 at 1:58 PM

    Personally, I'd like to know more about you as a person.

  9. Posted by Machine | May 27, 2014 at 7:57 PM

    Still, assuming the catastrophic risks bear no correlation with the market returns, investors according to the capm model should demand a return equal to the risk free rate. So. In that sense, this is to a certain extent free money…

  10. Posted by handyman London | June 2, 2014 at 4:03 AM

    hahah this topic has some really funny comments. However, I've never thought of this possibility. Thanks for the share.