Catastrophe bonds touted in climate change fight

The issuing of catastrophe bonds is being encouraged by the National Development and Reform Commission to leverage financial resources in response to climate change, according to a strategy guideline published by the commission on Monday.

Catastrophe bonds are risk-linked securities that transfer a specified set of risks from a sponsor to investors. They were created and first used in the mid-1990s in the aftermath of Hurricane Andrew, the first hurricane of the 1992 Atlantic hurricane season, and the 1994 Northridge earthquake, centered on the San Fernando Valley region of Los Angeles.

The commission has called for innovative financing methods to soften the impact of climate change, including the issuance of catastrophe bonds, developing insurance products for the agricultural and forestry sectors and introducing more foreign capital.