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 moreDevelopment insurer
An insurer supporting development goals through insurance products and technical assistance.
Ex ante
Actions, decisions or financial arrangements made before a disaster or crisis occurs.
Disaster
A severe event causing widespread harm that exceeds a community’s ability to cope alone.
Vulnerability
Conditions that increase how severely people or communities are affected by hazards.
Risk profile
Underlying risks that an organisation or country is exposed to and the extent to which they are mitigated by pre-arranged finance.
Early warning system
Systems that monitor hazards and share information early, so people can act in time.
