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 moreRisk layering
Using different financial instruments for different disaster frequencies.
Vulnerability
Conditions that increase how severely people or communities are affected by hazards.
Parametric insurance
Insurance that pays when an agreed indicator reaches a set level, not actual losses.
Shock-responsive social protection
Social protection systems adapted to scale quickly when large shocks affect many people.
Disaster risk finance diagnostic
An analytical assessment of a country’s disaster risk profile.
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.
