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Insurance Definition: CATASTROPHE BONDS

By Compuquotes Team on March 27th, 2008

CATASTROPHE BONDS:

Definition:

  • Risk-based securities that pay high interest rates and provide insurance companies with a form of reinsurance to pay losses from a catastrophe such as those caused by a major hurricane. They allow insurance risk to be sold to institutional investors in the form of bonds, thus spreading the risk. (See Securitization of insurance risk

Information provided by Insurance Information Institute

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