What Does Cat Bond Lite Mean?

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What does Cat Bond Lite mean? Read on to discover the definition & meaning of the term Cat Bond Lite - to help you better understand the language used in insurance policies.

Cat Bond Lite

Cat Bond Lite

A risk-transfer agreement, such as an industry loss warranty (ILW) or collateralized reinsurance contract, that is transformed into a security. The cat bond lite structure seeks to offer cedents an approach to securitization that does not include the sometimes cumbersome, expensive, and time-consuming overhead of traditional catastrophe bonds, while still delivering the structural discipline and potential liquidity that catastrophe bonds provide. Consequently, sponsors have gained the ability to complete tactical capital management activities faster and with lower frictional costs while still accessing new sources of capital.

We hope the you have a better understanding of the meaning of Cat Bond Lite.

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