Catastrophe (CAT) Bonds are often issued by states with the aim of raising funds for disaster relief during times of natural calamities (Earthquakes, Tsunamis, Cyclones, etc). Typically, Investors purchase these bonds, providing the government with an upfront lump sum of money. While the bond is active and before any calamity (referred to as a triggering event) occurs, investors receive regular interest payments (which are typically higher than those from traditional bonds) for the duration of the bond. If a triggering event occurs, the bond is "triggered," and the principal set aside is redirected to the government for funding diaster relief.In this scenario, investors lose all or a portion of their principal, depending on the bond’s specific structure and the severity of the event. If no triggering event happens, these interest payments continue through the life of the bond, and investors get back their initial principal in addition to the interest earned over the bond’s term.