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 moreInternational premium support
Premium support is international funding to pay for insurance premiums.
Disaster risk management
Policies and actions to reduce disaster risks, manage impacts and strengthen resilience.
Preparedness
Skills, systems and resources developed to respond effectively to likely future crises.
Official development assistance (ODA)
Public aid supporting development and welfare in eligible countries, usually on concessional terms.
Attachment point
The loss level above which a reinsurer begins paying under a reinsurance agreement.
Covariate shocks
Shocks affecting many households at once where losses are shared across the same community.
