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” The client of the disaster bond is properly marketing catastrophe insurance. He puts down his funds and may lose it all if some specified bad point happens in just a predetermined variety of many years: a giant hurricane hitting Miami, say, or some insurance company dropping much more than $1 billion on any one normal catastrophe. In exchange, the cat-bond seller — an insurance company wanting to insure by itself in opposition to Extraordinary losses — pays the client a high rate of curiosity.
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They could have some sense of what the price of the danger need to be. It had been a unprecedented idea: that disaster may very well be fair.
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