Catastrophe swap agreement

Agreement entered into by an insurer to provide fully collateralized protection against severe natural catastrophes like hurricanes. A special purpose vehicle is created to sell a catastrophe swap to a debtor company. The vehicle in turn issues debt obligations to in particular institutional investors to collateralise the vehicles´ obligations to the insurer. A single pay out is made on the occurrence of catastrophe events or after a defined number of events over a defined period of time have occurred. Triggers can range from aggregate losses meeting or exceeding defined threshold amounts or is specific parameter criteria (wind speeds or ground motions are met or exceeded.