Index
In risk finance, an index is an indicator or measure that is chosen to be a good proxy for a type of shock, and used to determine payouts. For example, tropical cyclone categories used as an index for property damage or area average yield as a measure of lost agricultural production. Modelled estimates of damage costs are also used as indices (Centre for Disaster Protection).
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.
Risk transfer
When disaster risk is shifted to insurers or capital markets.
Sovereign insurance
Sovereign insurance is insurance coverage purchased by a national government to protect its budget against the financial impacts of disasters.
Cost multiple
The cost multiple measures the average amount a government pays to receive USD 1 of payout from a financing instrument over its lifetime.
Hazard
A natural or human process that can cause injury, damage or disruption.
Disaster risk finance diagnostic
An analytical assessment of a country’s disaster risk profile.
