TOKYO -- With growing instability in financial markets and decent returns on traditional financial products ever harder to attain, many investors are turning to an unlikely source in order to diversify portfolios.
Catastrophe bonds, commonly referred to as cat bonds, do not take risks on volatile price movements of traditional financial products, such as stocks and other types of bonds. Instead, they take risks on earthquakes, typhoons and other natural disasters. Investors can earn returns on the principal in full with interest, if no disaster occurs before maturity.
