A Jurisprudential Study of Catastrophic Bond Issuance Mechanism

The risk securitization process shows the relationship between insurance industry and capital markets. Securities resulting from this process have different kinds and are known as insurance-linked securities. These securities have created substantial benefits for the insurance industry and capital markets. In addition to increasing the insurance capacities and boosting the insurance companies’ financial and capital power, the securities will greatly improve the opportunity to gain return with a low correlation with the total capital market return, and diversify the portfolio.This study, after explaining the catastrophic bond (which is the most popular type of ILS) and the issuance mechanism of this security tries to answer whether in terms of Shiite jurisprudence the issuance of this security is possible. The Jurisprudential analysis presented in this paper was performed by using content analysis and deductive-analytical method. After introducing the main economic reasons and components of this instrument, the possibility of this security issuance in terms of Shiite jurisprudence is considered, and the jurisprudential and legal dimensions of this mechanism will become clearer.