| Catastrophe
Bond - CAT |
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A high yield debt that is usually insurance-linked and meant to raise
money in case of a catastrophe such as a hurricane or earthquake.
It has a special condition that states that if the issuer (insurance
or reinsurance company) suffers particular predefined catastrophe
loss, then payment of interest and/or repayment of principal is either
deferred or completely forgiven.
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One
advantage to CAT bonds is that they are not closely linked to the
stock market or economic conditions. |
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