Structure
Most catastrophe bonds are issued by special purpose reinsurance companies domicilied in the Cayman Islands, Bermuda, or Ireland. These companies typically write one or more reinsurance policies to protect buyers (most commonly, insurers or reinsurers) called "cedants." This contract may be structured as a derivative in cases in which it is "triggered" by one or more indices or event parameters (see below), rather than losses of the cedant.
Some bonds cover the risk that multiple losses will occur. The first second event bond (Atlas Re) was issued in 1999. The first third event bond (Atlas II) was issued in 2001. Subsequently, bonds triggered by fourth through ninth losses have been issued, including Avalon, Bay Haven, and Fremantle, each of which apply tranching technology to baskets of underlying events. The first actively managed pool of bonds and other contracts ("Catastrophe CDO") called Gamut was issued in 2007, with Nephila as the asset manager.
Read more about this topic: Catastrophe Bond
Famous quotes containing the word structure:
“Who says that fictions only and false hair
Become a verse? Is there in truth no beauty?
Is all good structure in a winding stair?
May no lines pass, except they do their duty
Not to a true, but painted chair?”
—George Herbert (1593–1633)
“If rightly made, a boat would be a sort of amphibious animal, a creature of two elements, related by one half its structure to some swift and shapely fish, and by the other to some strong-winged and graceful bird.”
—Henry David Thoreau (1817–1862)
“What is the structure of government that will best guard against the precipitate counsels and factious combinations for unjust purposes, without a sacrifice of the fundamental principle of republicanism?”
—James Madison (1751–1836)