A Cat-in-a-Box trigger is a parametric trigger that pays out a pre-defined amount based on specific parameters of an event. A good example can be seen with protecting oil rigs off the Gulf Coast of the U.S. against the impacts of hurricanes. Pre-defined parameters such as windspeed, intensity and so on are agreed, and a specified geographical area (box) is established surrounding the oil rig. Should a hurricane pass through the ‘box’ meeting the specified criteria the bond is triggered and claims are payed. This type of trigger mechanism is extremely transparent to investors as it’s based on pre-defined parameters rather than actual claims, although this can result in an unforeseen basis risk for the insurer or reinsurer.

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