20. Cat Bonds – big name insurance companies like Allstate, Swiss Re, and USAA, and even governments like Jamaica offload their risk of a large catastrophic event such as a major hurricane or wildfires by selling high-yielding cat bonds.

Investors get a nice coupon and the return of their principal if catastrophic losses to that company or government don’t exceed a pre-determined amount during the bond ownership period.

However, if catastrophic losses for a risk like a hurricane do exceed the threshold, then the cat bond investor could potentially lose out on interest payments and their principal invested.

A beach house is destroyed by Hurricane Sandy.

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