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 moreContingent loan (or credit) and grants
A pre approved loan or grant released automatically when agreed crisis conditions or triggers are met.
Contingent liabilities
Possible financial obligations that only become real if specific future events occur.
Disaster risk management
Policies and actions to reduce disaster risks, manage impacts and strengthen resilience.
Fragility
High exposure to risk combined with weak capacity to cope, often leading to crisis.
Risk retention
When governments retain and finance disaster costs themselves.
Climate resilient debt clause or 'debt pause clause'
A provision in sovereign debt contracts that enables the borrower to temporarily stop repaying debt service for a pre-agreed period when a predefined event occurs.
