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Catastrophe Bond |
Also found in: Wikipedia | 0.01 sec. |
Catastrophe Bond A high-yield debt security backed by insurance premiums. Insurance companies issue catastrophe bonds in order to raise funds for hypothetical insurance payouts resulting from one or more stated events such as floods or fires. The bondholder receives coupons from what the insurance company collects in premiums. However, if the insurance company suffers a loss from a payout of one of stated events, the obligation to repay the bond is either relaxed or forgiven. The main advantage to a catastrophe bond, despite the stated risk, is the fact that it offers a high yield without much regard for the performance of the broader economy because people and institutions will almost always set money aside for insurance premiums. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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| Catastrophe bonds, or cat bonds, that transfer certain low-frequency, high-severity property and casualty risks to capital market investors. Cat bonds typically are issued by special purpose entities created by insurers to spread the risk of losses from low frequency natural catastrophes such as hurricanes and earthquakes. The rise of industry loss warranties, sidecars and cat bonds marked 2006 and was a response to the 2005 catastrophes" said Attisani. |
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