Mitsui Sumitomo Insurance will begin to issue catastrophe bond to non-financial companies, reports have revealed.
The bonds will be issued to businesses as an option to guard against natural disasters, Nikkei Asian Review
Mitsui Sumitomo Insurance will look to strengthen its business as the market for cat bonds continues to increase thanks to a 4%-5% annual return.
The insurer will look to offer 10 billion yen to 20 billion yen ($97.4 million to $194 million) per batch of bonds as the business will offer derivative contracts to handle the issuance via a special purpose company as clients such as railway operators, electricity and gas suppliers and manufactures look to get on board, Nikkei Asian Review
Cat bonds work in a similar way to insurance and when a predetermined natural disaster strikes, the covered company receives compensation.
Cat bonds are normally used by financial institutions with the expertise to set conditions for natural disaster events which could present an obstacle for non-financial businesses.
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