IGCP studies issuance of catastrophe bonds

The Portuguese Treasury and Debt Management Agency (IGCP) is evaluating the issuance of catastrophe bonds, also known as “cat bonds.” These financial instruments are designed to transfer the risk of losses caused by extreme events, such as earthquakes or storms, from the state to investors.

Pedro Cabeços, president of the IGCP, confirmed the study during a parliamentary commission meeting. He noted that while these products are not common in the European market, they require deep technical analysis. The evaluation covers not only the cost of the operation but also its operational feasibility and the definition of the “trigger”—the specific technical conditions that determine when investor capital is used to cover damages.

Under this mechanism, investors receive interest payments as long as the specified catastrophe does not occur. However, if the predefined trigger event takes place, investors may lose part or all of their invested capital to cover the resulting losses.