Catastrophe, or cat, bonds compensate buyers for taking on the risk of extreme events, such as hurricanes and earthquakes. Typically, they are issued on behalf of home and other property insurers to help them pay claims after damages reach specified levels from designated events, such as a hurricane. These bonds have risen in popularity among yield-hungry buyers, and the securities have become an important backstop in the reinsurance world, which provides insurance for insurers. Sales of cat bonds have picked up since the financial crisis, when their strong returns relative to other investments sparked an issuance boom.

http://www.wsj.com/articles/hurricane-matthew-to-test-catastrophe-bond-market-1475791599