The New Zealand Superannuation Fund is investing US$125 million ($176.2 million) to US$250 million in "catastrophe bonds".
The Guardians of New Zealand Superannuation yesterday said the bonds were a strong diversification play and offered attractive risk-adjusted returns.
Catastrophe bonds and other insurance-linked securities are a way for capital markets to provide reinsurance to the insurance industry.
The risk could be mitigated and was capped, the guardians said.
NZ Super had made an initial commitment to the strategy of US$125 million with potential to expand to US$250 million.
Most of the investment would be in securities that covered hurricanes in the United States, with some products covering European wind storms and Japanese earthquakes.
The guardians said that essentially the bonds covered catastrophic events in areas where such events presented a low but genuine risk.