Pac-Coast Insurance (PCI)concentrates its underwriting activities in California.The company is concerned that if a catastrophic earthquake occurs,it might threaten the solvency of the company.To address this risk,PCI issued some debt securities.If a catastrophic earthquake occurs,PCI does not have to repay the full amount borrowed or pay interest.The securities PCI issued are called

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The debt securities issued by PCI that do not require full repayment or payment of interest in the event of a catastrophic earthquake are known as catastrophe bonds. These bonds transfer the risk of an earthquake from the insurance company to the bond investors, who receive higher yields in exchange for taking on the risk. The bonds are structured as contingent debt, meaning that if the earthquake occurs and meets certain predetermined criteria, the bondholders may not receive full payment or interest.

Pac-Coast Insurance (PCI)concentrates Its Underwriting Activities in California