A Jurisprudential-Comparative Survey of Catastrophe (CAT) Bonds

Securitization as a most common tool in risk management and financing is being utilized in insurance and reinsurance companies for managing the risk of covering catastrophic risks. Catastrophe (CAT) bond Issuance may be defined as the transfer of catastrophic risks to the capital. Rather than an insurer transferring its underwriting catastrophic risk to a (re)insurer, the risk is transferred to the broader capital markets. Securitizing insurance risk involves theA problem facing creation of this modern financial-insurance instrument is it's conformity with holy Islamic religion (Shariah). In this study, comparative approach is adopted to Jurisprudential examination of Catastrophe (CAT) bonds. By comparative approach we mean the use of Jurisprudential judgments of other securities and contracts which is defined, to find the parallel judgments for Catastrophe (CAT) bonds. Here, there are three probabilities about Catastrophe (CAT) bonds:1- These bonds are like conventional bonds.2- These bonds are like asset-backed securities (ABS).3- These bonds are like Insurance contract.Despite of term similarity with conventional bonds, Catastrophe (CAT) bonds arent conventional bonds and their Jurisprudential judgment of prohibition couldnt apply to Catastrophe (CAT) bonds. Likewise, the Catastrophe (CAT) bonds arent asset-backed securities and so their Jurisprudential judgment couldnt apply to Catastrophe (CAT) bonds. But, as Catastrophe (CAT) bonds, similar to insurance contract, are risk transferring tool, the Jurisprudential judgment of insurance contract, as a modernistic permissible contracts, could apply to Catastrophe (CAT) bonds. Thereby we can conclude that Catastrophe (CAT) bonds are accepted and permissible in an Islamic framework.