Munich Re is the latest group to seek sanctuary in capital markets as rising catastrophe claims force insurers to seek alternative means of transferring risk.

The German reinsurer has established a $US75 million ($69.9 million) catastrophe bond through Bermuda-based special purpose insurer Queen Street V Re as insulation against hurricane exposure in the US and windstorms in Europe.

In the past week, US insurers Chubb and Liberty Mutual have sold catastrophe bonds worth $US125 million ($116.5 million) and $US275 million ($256 million) respectively.

Catastrophe bonds were created in the ’90s as an alternative to reinsurance and retroceding by transferring risk from insurers and reinsurers to market investors. Buyers of catastrophe bonds risk losing their money if a catastrophe strikes, but benefit in the interim from returns insulated from fluctuations in the wider market.

The Cayman Islands and Bermuda are the world’s largest exchanges for cat bond trading, with the former valued at $US8.5 billion ($7.9 billion).

The Bermuda Stock Exchange said last month its listings of insurance-linked securities, including cat bonds, had risen to a record $US3.4 billion ($3.16 billion) by the end of 2011.

Swiss Re said last September the market for insurance-linked securities such as catastrophe bonds continues to expand and is broadening beyond US perils.

It says that when pricing is attractive relative to traditional reinsurance, cat bonds could act as a substitute layer in an existing reinsurance tower.

Aon Benfeld has estimated the number of outstanding bonds in the year to June 30 this year will be worth $US4.4 billion ($4.1 billion).