https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3ACouponDefinition:Coupon - Revision history2026-04-30T07:18:24ZRevision history for this page on the wikiMediaWiki 1.43.8https://www.insurerbrain.com/w/index.php?title=Definition:Coupon&diff=7482&oldid=prevPlumBot: Bot: Creating new article from JSON2026-03-10T12:59:31Z<p>Bot: Creating new article from JSON</p>
<p><b>New page</b></p><div>🎫 '''Coupon''' in the insurance and insurance-linked securities context refers to the periodic interest payment made to investors who hold [[Definition:Insurance-linked security (ILS) | insurance-linked securities]] such as [[Definition:Catastrophe bond | catastrophe bonds]], or to holders of [[Definition:Subordinated debt | subordinated debt]] and other capital instruments issued by [[Definition:Insurance carrier | insurance carriers]]. The coupon rate compensates investors for the [[Definition:Credit risk | credit risk]] and, in the case of [[Definition:Catastrophe bond | cat bonds]], the [[Definition:Catastrophe risk | catastrophe risk]] they assume. It is typically expressed as a spread above a benchmark rate — often the Secured Overnight Financing Rate (SOFR) — reflecting the probability-weighted [[Definition:Expected loss | expected loss]] embedded in the instrument.<br />
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💵 For a [[Definition:Catastrophe bond | catastrophe bond]], the coupon is funded by the [[Definition:Insurance premium | premium]] that the sponsoring insurer or [[Definition:Reinsurance | reinsurer]] pays into a [[Definition:Special purpose vehicle (SPV) | special purpose vehicle]], combined with the investment return on collateral held in a trust account. If no qualifying [[Definition:Triggering event | triggering event]] occurs during the bond's term, investors collect their coupons and receive their [[Definition:Principal | principal]] back at maturity. Should a covered catastrophe strike and breach the bond's [[Definition:Attachment point | attachment point]], part or all of the principal may be diverted to the sponsor to pay [[Definition:Insurance claim | claims]], and coupon payments may cease. The size of the coupon therefore reflects a market-clearing price for [[Definition:Risk transfer | transferring]] peak [[Definition:Catastrophe risk | catastrophe exposure]] from traditional [[Definition:Reinsurance | reinsurance]] markets to [[Definition:Capital markets | capital markets]] investors.<br />
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📉 Coupon levels serve as a real-time barometer of investor appetite for insurance risk. When [[Definition:Catastrophe modeling | catastrophe models]] are revised upward or a series of major [[Definition:Loss event | loss events]] depletes market capacity, coupon spreads widen, signaling that investors demand greater compensation. Conversely, periods of abundant capital and benign loss experience compress spreads, lowering the cost of [[Definition:Risk transfer | risk transfer]] for sponsoring [[Definition:Insurance carrier | carriers]]. Tracking coupon trends helps [[Definition:Chief financial officer (CFO) | CFOs]] and treasury teams at insurers decide whether to access the [[Definition:Insurance-linked security (ILS) | ILS]] market or rely on traditional [[Definition:Reinsurance | reinsurance]], making the coupon a practical decision-making tool in [[Definition:Capital management | capital management]] strategy.<br />
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'''Related concepts'''<br />
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* [[Definition:Catastrophe bond]]<br />
* [[Definition:Insurance-linked security (ILS)]]<br />
* [[Definition:Special purpose vehicle (SPV)]]<br />
* [[Definition:Risk transfer]]<br />
* [[Definition:Attachment point]]<br />
* [[Definition:Capital markets]]<br />
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