2. Property Insurance Cat bonds can also be used to hedge personal property risks. For instance, one can mortgage homeowners insurance. The individual risks of damage due to floods or an earthquake would then be ceded over to the investors in capital markets. In case any of the events fails to materialize, the bond matures with no losses. Then, for each one of the events that eventually occurs, this bond pays out face value as compensation for the losses incurred under the policies of the insurer.
3. Disability or Income Protection: The second application context is disability or income protection insurance. Here again, as in the previous case, it can be a mortality bond again but the party taking the risk is the investor and the party receiving the payment is the insured on the basis of disability or extended periods of absence from work.