A catastrophe bond (cat bond) is a type of insurance‑linked security that transfers specified catastrophe risks—such as hurricanes, earthquakes, or pandemics—from insurers or reinsurers to capital market investors. If a defined trigger is met, the principal is used to cover losses, providing sponsors with multi‑year protection and investors with uncorrelated return potential. Cat bonds have become a critical component of alternative risk transfer, enabling balance‑sheet relief, diversification of reinsurance capacity, and pricing signals for peak‑peril exposures.
