Photo: Russ Allison Loar via Flickr
Policy Solution

Catastrophe (CAT) bond

Funding and Financing


Summary: Funds are paid to an insurer when a pre-determined index is triggered like an extreme weather event. Proceeds from the CAT bond are put in a collateral account and only released if the trigger event occurs. If a payment is triggered, typically interest and principal repayment obligation are deferred or forgiven.

Implementation: Use CAT bonds to provide long-term financial protection against climate-related risk. One example is a Resilience Bond, which links catastrophe insurance to infrastructure investments using insurance savings as revenue to fund resilient infrastructure projects.

Considerations for Use: CAT bonds can include interest or repayment discounts to governments that invest in risk-mitigation infrastructure.

  • Policy Levers:

    Funding and FinancingThe allocation of public or philanthropic funding or private financing to implement projects, including risk transfer mechanisms.
  • Trigger Points:

    Preparatory measures (actions to establish authority to act)Actions to establish/ ensure the authority to act when appropriate trigger-points occur.
  • Intervention Type:
  • Sectors:
    Disaster Risk Management  


  • Target Beneficiaries:
    Business owners, Property owners, Renters, Residents
  • Phase of Impact:
    Risk reduction and mitigation
  • Metrics:
    Proceed amount and allocation


  • Intervention Scale:
    Region, State/Province
  • Authority and Governance:
    National government, State/provincial government
  • Implementation Timeline:
    Short-term (1-2 Years)
  • Implementation Stakeholders:
    City government, Industry, National government, State/provincial government
  • Funding Sources:
    private investment, Public investment
  • Capacity to Act:


  • Cost-Benefit:
  • Public Good:
  • GHG Reduction:
  • Co-benefits (Climate/Environmental):
  • Co-benefits (Social):
    Increase property values, Reduce poverty