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:
“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)
“The question is still asked of women: “How do you propose to answer the need for child care?” That is an obvious attempt to structure conflict in the old terms. The questions are rather: “If we as a human community want children, how does the total society propose to provide for them?””
—Jean Baker Miller (20th century)
“Communism is a proposition to structure the world more reasonably, a proposition for changing the world. As such, we have to analyze it and, if we deem it reasonable, act upon it.”
—Friedrich Dürrenmatt (1921–1990)