Expected loss
The modelled annual loss cost of a bond, usually central to pricing discussions but not sufficient on its own.
ILS pricing education
Cat bond pricing explained
Cat bond pricing depends on expected loss, peril, region, trigger type, attachment, exhaustion, market conditions, investor demand, and relative value against other ILS opportunities.
Pricing building blocks
What drives a cat bond spread?
Attachment and exhaustion
The layer of risk matters. A remote layer behaves differently from a lower attaching layer exposed to more frequent losses.
Trigger and peril
Trigger type, basis risk, peril, territory, seasonality, and data quality all influence how investors assess compensation.
Course context
How ILS101 teaches pricing
The course introduces pricing through the relationship between catastrophe models, expected loss, risk premiums, market spreads, and secondary market valuation. It also explains why cat bond pricing is shaped by supply, demand, trapped capital, recent loss experience, and broader reinsurance market conditions.
- Expected loss and risk load
- Spread multiples and relative value
- Trigger comparison and basis risk
- Primary issuance versus secondary market valuation
Related ILS101 pages
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Study ILS pricing in context
Pricing makes more sense when it is connected to structure, triggers, modelled risk, and reinsurance market behaviour.
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