Accuracy of Premium Calculation Models for CAT Bonds

CAT bonds are of significant importance in the field of alternative risk transfer. Since themarket of CAT bonds is not complete, the application of an appropriate pricing model is of high relevance.We apply different premium calculation models in order to compare them with regard to theirpredictive power. Without taking the financial crisis into account, a version of the Wang transformationmodel and the linear model are the most accurate ones. In contrast, under consideration of the financialcrisis, all analyzed models are approximately equivalent. Furthermore, we find that CAT bondspecific information does not improve out-of-sample results.