Any ISA that has been awarded the UK Treasury’s CAT mark. See CAT STANDARDS.

Stands for fair Charges, easy Access and decent Terms. Voluntary government-initiated standards to help savers identify straightforward ISAs that offer a reasonable deal. Firms adopting or exceeding these standards market their ISAs as ‘CAT marked’. All three types of ISA components (Cash ISAS, Life Insurance ISAs and Stocks and Shares ISAs) qualify for CAT marking. The cost varies with each type of investment but is controlled.

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.

Put options that enable incorporated insurers to sell shares (equity) to capital market investors at pre-negotiated prices when catastrophe losses exceed the levels specified in the options. CatEPuts therefore provide insurers with access to additional equity in the wake of catastrophic losses. This is alternative risk financing by way of post-loss funding that obviates the need for the insurer to ‘sit on’ on large amounts of capital waiting for the loss event to occur and thereby improves the insurer’s return on assets. These instruments are also traded on the Chicago Board of Trade and the Bermuda Commodities Exchange.

a form of excess of loss reinsurance under which the ceding insurer is indemnified, subject to a specified retention and an over-riding limit, against an accumulation of losses arising from a catastrophic event (for example, an earthquake or hurricane).

Non-proportional reinsurance layer of cover with an excess point so high that the layer will only be affected by rare catastrophic losses.

Options traded on the Chicago Board of Trade (CBOT) and the Bermuda Commodities Exchange (BCOE) the value of which is linked to the occurrence of defined losses caused by natural disasters.