Catastrophe bond
A catastrophe bond (cat bond) is a risk-transfer financial instrument that allows governments or insurers to transfer disaster risk to capital market investors. If a specified disaster event occurs, the bond’s principal is used to provide funds for recovery; if no event occurs, investors receive interest payments and their principal back.
This working paper presents a framework that compares contingent loans, grants from multilateral development banks, catastrophe bonds, and insurance provided through regional risk pools.
Read moreCrisis protection gap
The difference between expected crisis costs and funding already arranged to cover them.
Development bank
A public financial institution providing loans, grants and expertise to support development goals.
Early warning system
Systems that monitor hazards and share information early, so people can act in time.
Indemnity insurance
Insurance that pays based on assessed losses after damage to a specific asset.
Financial Flows
Financial flows refer to the movement of funds for disaster risk reduction (DRR) and response, covering planned and unplanned sources.
Risk transfer
When disaster risk is shifted to insurers or capital markets.
