Catastrophe bonds (CAT bonds) are risk-linked securities used by
the insurance industry to transfer risks associated
with the occurrence of natural disasters to the capital markets. Despite
their growing importance, relatively few studies on CAT bond pricing, design
and their application are available in the literature. Indeed, existing
pricing formulations for pricing analysis do not account for uncertainties
in model parameters and are not contextualized in a more general CAT bond
coverage design procedure for an area of interest with a distributed
portfolio. For these reasons, this paper presents a general procedure for
designing a CAT bond-based coverage for a spatially distributed portfolio
against losses due to natural hazards. The procedure is then applied to a
case study represented by the residential building portfolio in Italy,
aiming to design a CAT bond-based coverage scheme against losses induced by
seismic events all over the entire national borders.