Baillie Gifford faces £12m 'cat bond' payout after hurricane

Edinburgh-based fund manager Baillie Gifford is on the hook to pay out as much as £12m in "catastrophe bond" insurance as a result of Hurricane Melissa, according to data seen by The Observer.

- Barney Macintyre

Through its exposure in two funds, Baillie Gifford is part of a group of investors expecting to pay a possible total of $150m in disaster relief funds to Jamaica, after last week's category 5 storm triggered terms for a payout.

So-called "cat bonds" are a relatively new type of fixed income product that allows help to get to where it is needed more immediately than traditional insurance coverage. In return for holding the bonds - which have preagreed parametric triggers, such as wind speed or earthquake severity - investors can usually expect a high yield of around 9% per year.