Rogue Trader Cat Bonds

In the textbook, we discussed cat bonds. Cat bonds, which are often issued by insurers or reinsurers, have a trigger based on natural catastrophes. Credit Suisse is taking the concept of a cat bond even further. The company has approached investors about a cat bond like issue that has a trigger that would cover operational losses due to events such as rogue trading or cybercrime. A major drawback is that quantifying the costs of cybercrime is a difficult process. If the Credit Suisse operational risk cat bond succeeds, we will likely see more of these bonds in the future.