Catastrophe Bonds. From Structure to Strategy – A Cluster Analysis at European Level

As a core activity and discipline of corporate management and corporate governance, risk management is, especially nowadays, a central part in pursuing the sustainable development desiderates, both from the perspective of the firm and of the society as a whole.Considering the negative impact natural catastrophes have on the companies’ and countries’ competitiveness, the development of sustainable financial products that make a contribution to transferring the risk and allocating the capital in case of disasters stands for a continual preoccupation, especially for the (re)insurance industry, while the study of catastrophe bonds – insurance-linked securities – is of interest in the specialized literature. In this context, the scope of the present research is to expand the empirical studies within this field while examining the link between the structure of the catastrophe bonds and the risk management approach employed while accessing the capital markets through this transactions.The methodology entailed clustering a selection of transactions developed by European cedents based on the size of each issue and correlating the results with an innovative score, developed to encompass several important catastrophe bonds structural components.The findings reflect that the general structural elements of the financial transactions reflect closely the corporate approach regarding the innovative risk intermediation instruments for the examined catastrophe bonds deals. The outcomes also emphasize, as expected, that companies with a stronger presence on this market seem to have a more sophisticated risk management approach.