CAT Caught by The Tail

The paper “Catastrophe Bonds: An Important New Financial Instrument” by Dr. Michael Edesess explores the very basics of the CAT bond market. Catastrophe bonds (CAT bonds) are a major category in the class of securities known as insurance-linked securities or ILS. Their purpose is to crowd-source reinsurance coverage, to reduce reinsurers’, insurers’, and self-insurers’ reserve requirements and reduce their cost of coverage.