The SPV invests the bond proceeds in low-risk securities, and pays investors their interest and the principal at maturity from that collateral. The sponsor pays premiums to the SPV and, if an event occurs, receives the collateral to cover its losses.
Catastrophe bond
- Japanese
- キャットボンド
- Also known as
- CAT bond
- Last reviewed
- October 4, 2026
This is a draft, shown for review before publication.
A catastrophe bond is a bond issued through a special purpose vehicle (SPV) on behalf of a sponsor such as an insurer. If a specified event such as a natural disaster occurs, part or all of the investors' principal passes to the sponsor. If it does not, investors receive their interest and principal.