hurricane katrina was the last time a hurricane hit florida.
hurricane katrina was the last time a hurricane hit florida.
when was the last time a hurricane hit florida?
hurricane katrina
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for example, if an insurer has built up a portfolio of risks by insuring properties in florida, then it might wish to pass some of this risk on so that it can remain solvent after a large hurricane. it could simply purchase traditional catastrophe reinsurance, which would pass the risk on to reinsurers. or it could sponsor a cat bond, which would pass the risk on to investors. in consultation with an investment bank, it would create a special purpose entity that would issue the cat bond. investors would buy the bond, which might pay them a coupon of libor plus a spread, generally (but not always) between 3 and 20%. if no hurricane hit florida, then the investors would make a positive return on their investment. but if a hurricane were to hit florida and trigger the cat bond, then the principal initially contributed by the investors would be transferred to the sponsor to pay its claims to policyholders. the bond would technically be in default and be a loss to investors.
catastrophe bond