Corporate bonds issued by a reinsurer/insurer through a special purpose vehicle to capital market investors who supply capital in return for periodic interest payments. The interest payments and/or the return of principal are linked to the occurrence of a defined catastrophe event. The investors sacrifice (or defer) all or part of their principal and/or interest if the catastrophe occurs and a specified claims threshold is breached. The (re)insurer is then able to use the retained funds to pay for claims based on a specific insurance portfolio, a catastrophe loss index or a formula linked to a parametric trigger. Bonds thus transfer insurance risk to the capital market whose investors are attracted by high yields and an investment unrelated to general economic conditions. See SECURITISATION.