Act of God Bond
A bond issued by an insurance company, linking principal and interest to the company's losses due to natural disasters.
Investopedia Commentary
Such bonds create flexibility for insurance companies if an unforeseen natural disaster occurs. Because principal and interest depend directly on losses resulting from natural disasters, the insurance company can soften the financial strain by delaying, reducing or eliminating payment of the bond.
Related Links
Bond Basics Tutorial
See also: Bond, Catastrophe Bond, Interest, Principal