What does catastrophe bond mean?

Definitions for catastrophe bond
catas·tro·phe bond

Here are all the possible meanings and translations of the word catastrophe bond.

Wikipedia

  1. Catastrophe bond

    Catastrophe bonds (also known as cat bonds) are risk-linked securities that transfer a specified set of risks from a sponsor to investors. They were created and first used in the mid-1990s in the aftermath of Hurricane Andrew and the Northridge earthquake. Catastrophe bonds emerged from a need by insurance companies to alleviate some of the risks they would face if a major catastrophe occurred, which would incur damages that they could not cover by the invested premiums. An insurance company issues bonds through an investment bank, which are then sold to investors. These bonds are inherently risky, generally BB, and usually have maturities less than 3 years. If no catastrophe occurred, the insurance company would pay a coupon to the investors. But if a catastrophe did occur, then the principal would be forgiven and the insurance company would use this money to pay their claim-holders. Investors include hedge funds, catastrophe-oriented funds, and asset managers. They are often structured as floating-rate bonds whose principal is lost if specified trigger conditions are met. If triggered the principal is paid to the sponsor. The triggers are linked to major natural catastrophes. Catastrophe bonds are typically used by insurers as an alternative to traditional catastrophe reinsurance. For example, if an insurer has built up a portfolio of risks by insuring properties in Florida, then it might wish to pass some of this risk on so that it can remain solvent after a large hurricane. It could simply purchase traditional catastrophe reinsurance, which would pass the risk on to reinsurers. Or it could sponsor a cat bond, which would pass the risk on to investors. In consultation with an investment bank, it would create a special purpose entity that would issue the cat bond. Investors would buy the bond, which might pay them a coupon of LIBOR plus a spread, generally (but not always) between 3 and 20%. If no hurricane hit Florida, then the investors would make a positive return on their investment. But if a hurricane were to hit Florida and trigger the cat bond, then the principal initially contributed by the investors would be transferred to the sponsor to pay its claims to policyholders. The bond would technically be in default and be a loss to investors.Michael Moriarty, Deputy Superintendent of the New York State Insurance Department, has been at the forefront of state regulatory efforts to have U.S. regulators encourage the development of insurance securitizations through cat bonds in the United States instead of off-shore, through encouraging two different methods—protected cells and special purpose reinsurance vehicles. In August 2007 Michael Lewis, the author of Liar's Poker and Moneyball, wrote an article about catastrophe bonds that appeared in The New York Times Magazine, entitled "In Nature's Casino."

How to pronounce catastrophe bond?

  1. Alex
    Alex
    US English
    Daniel
    Daniel
    British
    Karen
    Karen
    Australian
    Veena
    Veena
    Indian

How to say catastrophe bond in sign language?

  1. catastrophebond

Numerology

  1. Chaldean Numerology

    The numerical value of catastrophe bond in Chaldean Numerology is: 7

  2. Pythagorean Numerology

    The numerical value of catastrophe bond in Pythagorean Numerology is: 8

Images & Illustrations of catastrophe bond

  1. catastrophe bondcatastrophe bondcatastrophe bondcatastrophe bondcatastrophe bond

Translation

Find a translation for the catastrophe bond definition in other languages:

Select another language:

  • - Select -
  • 简体中文 (Chinese - Simplified)
  • 繁體中文 (Chinese - Traditional)
  • Español (Spanish)
  • Esperanto (Esperanto)
  • 日本語 (Japanese)
  • Português (Portuguese)
  • Deutsch (German)
  • العربية (Arabic)
  • Français (French)
  • Русский (Russian)
  • ಕನ್ನಡ (Kannada)
  • 한국어 (Korean)
  • עברית (Hebrew)
  • Gaeilge (Irish)
  • Українська (Ukrainian)
  • اردو (Urdu)
  • Magyar (Hungarian)
  • मानक हिन्दी (Hindi)
  • Indonesia (Indonesian)
  • Italiano (Italian)
  • தமிழ் (Tamil)
  • Türkçe (Turkish)
  • తెలుగు (Telugu)
  • ภาษาไทย (Thai)
  • Tiếng Việt (Vietnamese)
  • Čeština (Czech)
  • Polski (Polish)
  • Bahasa Indonesia (Indonesian)
  • Românește (Romanian)
  • Nederlands (Dutch)
  • Ελληνικά (Greek)
  • Latinum (Latin)
  • Svenska (Swedish)
  • Dansk (Danish)
  • Suomi (Finnish)
  • فارسی (Persian)
  • ייִדיש (Yiddish)
  • հայերեն (Armenian)
  • Norsk (Norwegian)
  • English (English)

Word of the Day

Would you like us to send you a FREE new word definition delivered to your inbox daily?

Please enter your email address:


Discuss these catastrophe bond definitions with the community:

0 Comments

    Citation

    Use the citation below to add this definition to your bibliography:

    Style:MLAChicagoAPA

    "catastrophe bond." Definitions.net. STANDS4 LLC, 2020. Web. 28 Nov. 2020. <https://www.definitions.net/definition/catastrophe+bond>.

    Are we missing a good definition for catastrophe bond? Don't keep it to yourself...

    Free, no signup required:

    Add to Chrome

    Get instant definitions for any word that hits you anywhere on the web!

    Free, no signup required:

    Add to Firefox

    Get instant definitions for any word that hits you anywhere on the web!

    Nearby & related entries:

    Alternative searches for catastrophe bond:


    Thanks for your vote! We truly appreciate your support.