Catastrophe Bonds – What is the definition? – Finance Dictionary
January 22nd, 2012
www.subjectmoney.com http Catastrophe Bond – Catastrophe Bonds are bonds that coupon payments and repayment of principle is changed in the case of a specified catastrophe. Catastrophe bonds are a way for corporations to transfer “catastrophic risk” from insurance companies to the capital markets. An example of a catastrophe bond would be a bond issued by Oriental Land Co., which manages Tokyo Disney. In 1999 they issued a bond with a final payment that was dependent upon whether or not there had been an earthquake near the park. “Disaster” can be defined by total insured losses or by criteria such as Richter scale levels of an earthquake or the wind speed of a hurricane.
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