How hurricanes became a hot investment

This episode of Planet Money discusses catastrophe bonds (cat bonds), a financial tool used to transfer the risk of natural disasters from insurance companies and countries to investors. The podcast traces the history of cat bonds, starting with Karen Clark's modeling of hurricane risks, and explains how these bonds work, highlighting their appeal for diversification and potentially high returns. It also explores the increasing use of cat bonds by insurance companies and countries like Jamaica to manage risks associated with climate change and natural disasters, and touches on the World Bank's innovative use of pandemic bonds. The episode further explains how Jamaica utilized cat bonds to receive $150 million after Hurricane Melissa, demonstrating the practical benefits of this financial instrument for disaster recovery.