Which of the following statements is (are)true with respect to catastrophe bonds?
I.The bonds are issued by policyowners of the insurer.
II.The bonds have relatively high interest (coupon)rates.
A)I only
B)II only
C)both I and II
D)neither I nor II

Question

Quizplus · Accepted Answer

Catastrophe bonds are typically issued by insurers to transfer the risk of catastrophic events (such as hurricanes, earthquakes, or pandemics) to investors. The coupons on these bonds are higher than typical bonds due to the high risk involved. Therefore, statement I is incorrect as the bonds are not issued by policyowners, but by insurers. Statement II is true as catastrophe bonds have relatively high interest (coupon) rates.

Which of the Following Statements Is (Are)true with Respect to Catastrophe