The catastrophe market is surging, but not without growing pains. In times of peril, people often react with "either/or" responses. When a storm is about to hit a house, occupants of the home will posit such questions as, "Do I leave now, or do I go looking for the cat?" So it is no surprise that investors looking at insurance-linked securities (ILS) either do catastrophe bonds or don't. What's more, the "do" crew remain defensively bullish and will continue to invest, often on the basis of fuzzy numbers, while the "don't" camp defend their reasons, even in light of the industry's latest initiatives to perk up growth.

"With investors demanding higher revenues, cat bond spreads seem too thin," said one investment banker on his bank's refusal to consider cat bond investments. "There are no solid numbers and no adequate rating methodology. It's an invention based on ifs,' and we don't do ifs.'"

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