Catastrophe Bonds whose payoffs are tied to the occurrence of natural disasters offer insurers the ability to hedge event risk through the capital markets that could otherwise leave them insolvent if concentrated solely on their own balance sheets. At the same time, they offer investors a unique...

This paper has the following two objectives: to examine how reinsurance coupled with new financial instruments can expand coverage to those residing in areas subject to catastrophic losses from natural disasters, and to show how reinsurance and the catastrophe-linked financial instruments can be...