What are "Catastrophe Bonds"?

Now, we'll start with the name of the asset class. Catastrophe bonds is a misnomer because it's anything other than a catastrophe for your portfolio from a diversification perspective and an income standpoint. But as you mentioned, these bonds are so fascinating because they're not tied to any sort of corporate credit event. They're completely cash collateralized and the defaults are triggered not from a company being able to pay back principal plus accrued interest.

Rather, the existence or non-existence of a series of catastrophic events in a specific geography relative to a specific peril. Right? So what you're getting is a totally uncorrelated asset class with a very high Sharpe ratio.

You have a floating rate yield, so you have very little duration or interest rate risk, and you end up with a high single-digit or low double-digit yield and a fantastic total return and a very stable asset.