Catastrophe Bonds

A Catastrope Bond (CB) is a program type which involves catastrophe-linked securities contracts. It is used to raise money in case of a catastrophe, such as a hurricane or earthquake. It has a special condition that states if the issuer (insurance or reinsurance company) suffers a loss from a particular predefined catastrophe, then its obligation to pay interest and/or repay the principal is either deferred or completely forgiven.