Progress in the Theory of Catastrophe Bonds and Its Practice

In the context of intensifying global climate change and increasingly frequent extreme weather events, traditional insurance and government disaster relief systems face growing challenges. Catastrophe Bonds (Cat Bonds), which transfer catastrophe risks from insurance and reinsurance markets to capital markets, have emerged as an innovative financial instrument. This study examines the pivotal role of meteorological science and technology—including data collection, numerical forecasting, and artificial intelligence (AI) tools such as large language models (LLMs)—through the lens of financial meteorology. It comprehensively analyzes their foundational support throughout the entire lifecycle of Cat Bonds, including product design, pricing, issuance, triggering mechanisms, and settlement processes. The study provides an overview of the global Cat Bond market. It then focuses on China’s nascent market stage, policy drivers, and distinctive models. A comparative analysis identifies challenges in China’s catastrophe risk data infrastructure, refined modeling capabilities, and market ecosystem. Finally, the study proposes leveraging cutting-edge technologies, such as AI-driven weather forecasting models, as a strategic opportunity. Recommendations include establishing a national catastrophe risk data platform, deepening interdisciplinary integration of meteorology and finance, and enhancing core meteorological service capabilities. These measures aim to provide a robust scientific foundation for a multi-tiered catastrophe risk transfer system in China.