A closer look
If you ever wanted to monetize a natural disaster, financial engineering has you covered. Catastrophe bonds (Cat bonds) are high-yield debt instruments issued by insurers. Investors pump in cash, and as long as a hurricane doesn't obliterate Miami or an earthquake doesn't flatten Tokyo, those investors collect incredibly fat coupon payments. But if Mother Nature triggers the specific disaster parameters, the investors lose their entire principal to fund the payout. It is literally a high-stakes casino where Gordon Gekko places chips on the Richter scale.
