  Catastrophe risk is a major threat faced by individuals, companies, and
entire economies. Catastrophe (CAT) bonds have emerged as a method to offset
this risk and a corresponding literature has developed that attempts to provide
a market-consistent pricing methodology for these and other long-dated,
insurance-type contracts. This paper aims to unify and generalize several of
the widely-used pricing approaches for long-dated contracts with a focus on
stylized CAT bonds and market-consistent valuation. It proposes a loading
pricing concept that combines the theoretically possible minimal price of a
contract with its formally obtained risk neutral price, without creating
economically meaningful arbitrage. A loading degree controls how much influence
the formally obtained risk neutral price has on the market price. A key finding
is that this loading degree has to be constant for a minimally fluctuating
contract, and is an important, measurable characteristic for prices of
long-dated contracts. Loading pricing allows long-dated, insurance-type
contracts to be priced less expensively and with higher return on investment
than under classical pricing approaches. Loading pricing enables insurance
companies to accumulate systematically reserves needed to manage its risk of
ruin in a market consistent manner.
