Catastrophe Swap

A financial instrument exchanged in the OTC derivative market that protects investors and insurers from major financial loss due the unpredictable catastrophic loss spewed by Mother Nature.

The participating parties exchange or swap a stream of periodic payments, where the investors’ payments are directly aligned to predicted natural disaster losses measured by the catastrophic loss index, while the insurers’ payments are aligned to the investors’ diversified portfolios.

Not sure who comes out on top. Might be better to place bets on UFC fights instead.