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:
“When a house is tottering to its fall,
The strain lies heaviest on the weakest part,
One tiny crack throughout the structure spreads,
And its own weight soon brings it toppling down.”
—Ovid (Publius Ovidius Naso)
“I really do inhabit a system in which words are capable of shaking the entire structure of government, where words can prove mightier than ten military divisions.”
—Václav Havel (b. 1936)
“With sixty staring me in the face, I have developed inflammation of the sentence structure and definite hardening of the paragraphs.”
—James Thurber (1894–1961)