Pac-Coast Insurance (PCI) concentrates its underwriting activities in

Pac-Coast Insurance (PCI) concentrates its underwriting activities in California. The company is concerned that if a catastrophic earthquake occurs, it might threaten the solvency of the company.

To address this risk, PCI issued some debt securities. If a catastrophic earthquake occurs, PCI does not have to repay the full amount borrowed or pay interest. The securities PCI issued are called
A) catastrophe futures contracts.
B) interest rate swaps.
C) catastrophe bonds.
D) contingent options contracts.

ANSWER

Answer: C