Asset Classes

Catastrophe Bond

Catastrophe Bond

Acronym
Cat Bond
Plural Name
Catastrophe Bonds
Parent Asset Class

Catastrophe Bonds (Cat Bonds) are securities linked to insurance underwriting.

  • Insurance companies offer them to help cover certain catastrophe losses
  • They pay a return unless the specified catastrophe takes place, then they typically have large losses (if the losses are above a set threshold)
  • Uncorrelated with conventional stock and bond investments (natural distastes and catastrophes are unrelated to economic cycles)