Insurance companies, by issuing Cat bonds (catastrophe bonds) are sharing their risks with:
I. The government
II. Other insurance companies
III. The investors

Question

Quizplus · Accepted Answer

Insurance companies issue Cat bonds to transfer their risk to investors who are willing to take on the risk in exchange for high yields. The investors are not guaranteed repayment of their principal or interest if a catastrophic event occurs. The government and other insurance companies are not involved in the sharing of risks through Cat bonds. Therefore, the correct choice is III only.

Insurance Companies, by Issuing Cat Bonds (Catastrophe Bonds) Are Sharing