Glossary
Premium

When the share price is higher than the NAV per share, the shares are trading at a premium (shown as a percentage).

Discount

When the share price is lower than the NAV per share, the shares are trading at a discount (shown as a percentage). Normally a closed- ended investment company operates at a discount rather than a premium.

Net Asset Value (NAV)

The total market value of the investments held less any costs or borrowings.

NAV Per Share

The net asset value divided by the number of shares in issue.

Share Buybacks

CATCo Reinsurance Opportunities Fund Ltd. has the option to buy back its own shares and cancel them if the Directors think this will benefit the Company, especially if the share price is at a discount to the NAV. While buybacks reduce the total NAV, the advantage is that they increase the NAV per share.

Dividend

Dividends are paid from the profits of the company. CATCo Reinsurance Opportunities Fund Ltd. expects to pay a dividend each year (March).

Borrowing

CATCo Reinsurance Opportunities Fund Ltd. can borrow to fund short-term liquidity needs, but not for investment purposes, at the Manager’s discretion.

Insurance-Linked Securities (“ILS”)

ILS include catastrophe linked securities, commonly referred to as “cat bonds” (“Catastrophe Bonds” or “Cat Bonds”), and are a class of fixed income assets offering investors a defined return, usually in the form of U.S. Treasuries or LIBOR plus a spread, in exchange for the acceptance of risk tied to the occurrence of a specified catastrophe or extreme mortality event. Specified events may be on a parametric (i.e., based on an event’s physical characteristics), indemnity (i.e., based on actual losses experienced by a certain company or companies) or index (i.e., based on an estimate of insurance industry-wide losses, such as the estimates provided by Property Claim Services, Inc.) basis. ILS also include equity or debt investments in “sidecars”, which are similar to Cat Bonds, but the risk transferred is typically the risk of first dollar loss on a pro rata basis, rather than the risk after a certain “trigger” is reached.

Insurance-Linked Swaps and Industry Loss Warranties (“ILWs”)

Fundamentally similar to ILS, insurance-linked swaps and ILWs offer a defined premium payment in exchange for an event contingent loss payment upon the occurrence of a defined catastrophe or extreme mortality event.

The return on Insurance-Linked Instruments is tied primarily to property catastrophe insurance risk, and investment may be exposed to losses arising from hurricanes, earthquakes, typhoons, hailstorms, floods, tsunamis, tornados, windstorms, extreme temperatures, aviation accidents, fires, explosions, marine accidents and other perils.

Insurance-Linked Security Derivatives or Other Types of Derivative Instruments

These types of instruments will be used for a variety of reasons, including hedging purposes and other risk management purposes in order to:

(i) protect against possible changes in the market value of the investment portfolios resulting from fluctuations in the securities markets and changes in interest rates;

(ii) protect unrealized gains in the value of the investment portfolios;

(iii) hedge the interest rate or currency exchange rate liabilities or assets; or

(iv) protect against any increase in the price of any securities anticipated acquiring in the future.