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 retention
When governments retain and finance disaster costs themselves.
Social protection
Policies and programmes designed to reduce and prevent poverty and vulnerability throughout the life cycle.
Development bank
A public financial institution providing loans, grants and expertise to support development goals.
Pre-arranged financing
Financing approved before crises that is released automatically when agreed triggers are met.
Accountability
Being responsible for decisions and resources, listening to affected people, and accepting consequences for actions taken.
Risk profile
Underlying risks that an organisation or country is exposed to and the extent to which they are mitigated by pre-arranged finance.
