When natural disasters occur, governments are often considered as “insurers of last resort” and are expected to help with losses not covered by traditional insurance and to coordinate and fund reconstruction efforts. As the frequency and severity of natural disasters (storms, floods, wildfires) increase, this becomes financially unsustainable for budget-constrained governments. Catastrophe bonds are one mechanism designed to transfer these types of risks to the capital market. They work as an insurance policy in which the holder of the policy receives a pay-out when a disaster reaches a predetermined threshold. […]