The World Bank has priced a catastrophe bond that provides $150 million in insurance coverage for the Jamaican government against named storms.
IBRD CAR Jamaica 2024 is a renewal of the World Bank’s 2021 bond for Jamaica, IBRD CAR 130, which was the first small island nation to independently sponsor a cat bond.
Jamaica is highly exposed to tropical cyclone events and for this reason the cat bond is part of a multi-layered disaster risk financing strategy, reducing the fiscal burden of natural disasters while allowing the government to respond quickly.
The cat bonds were issued under the IMBR’s capital-at-risk bond program, which is used to transfer risks related to natural disasters and other risks from developing countries to the capital markets.
Dr. Nigel Clarke, Minister of Finance and Public Services, Government of Jamaica, commented: “Jamaica is pleased to sponsor the second International Capital Markets Catastrophe Bond protecting Jamaica from natural disasters with the much-appreciated support and assistance of the World Bank.
“In line with our national disaster risk financing policy, we aim to ensure the availability of fiscal resources to enable an immediate response to emergency costs that could arise from a direct hit by a high-intensity hurricane.” This catastrophe bond covers the 2024, 2025, 2026 and 2027 hurricane seasons and complements other disaster risk financing tools we have. We express our gratitude to the Insurance Authority of Hong Kong, which financially supported the transaction.”
The parametric structure of the bonds makes funds readily available to fund insurance payouts that will be triggered when a specified storm event meets the location and severity criteria specified in the terms of the bond.
This renewal attracted 15 global investors, providing the financing for Jamaica’s catastrophe insurance for four hurricane seasons.
Jorge Familiar, World Bank Vice President and Treasurer, added: “We are proud to partner with Jamaica for the second time on a cat bond transaction. In recent years, Jamaica has done a very impressive job with its fiscal consolidation. Through its comprehensive disaster risk strategy, of which this cat bond renewal plays a critical role, Jamaica is proactively protecting its fiscal position against risk in a way that can become a model for other countries vulnerable to natural disaster risk.
Aon Securities and Swiss Re Capital Markets were joint structuring agents and joint bookrunners for the transaction. AIR Worldwide is the risk model and calculation agent to be listed on the Hong Kong Stock Exchange (HKEX), the second time the World Bank has listed cat bonds in Hong Kong.
Lilia Burunchuk, Country Director for the Caribbean at the World Bank, commented: “The need for the Caribbean to prepare for the impact of disasters cannot be overstated as it is one of the most vulnerable regions globally. Critical to this process is the availability of resources, and the World Bank is pleased to support the Jamaica Disaster Bond, which will help the country respond and recover quickly in the event of an impact.”
You can read all about this transaction and others in the comprehensive guide to catastrophe bond deals on our sister site Artemis.
“Aon Securities LLC and Aon Securities (Hong Kong) Ltd. are privileged to work with the World Bank in the latest capital market transaction in support of the Government of Jamaica. With a strategic focus on initiatives including risk management and resilience aimed at positive economic response to climate change and financial emergency response, the Government of Jamaica continues to demonstrate exemplary leadership on the capital markets stage. We are deeply committed to contributing to this mission,” said Paul Schultz, CEO of Aon Securities.
Jean-Louis Monnier, Chief Executive Officer, Swiss Re Capital Markets Corporation, concluded: “Swiss Re Capital Markets is proud to partner with the World Bank and the Government of Jamaica to successfully execute the World Bank’s second bond issue in the market, supporting the Government of Jamaica. This transaction reflects the innovative trigger mechanics of the first issue in 2021, which allowed for faster disbursement after an event and has since become the market standard for disaster relief transactions. Once again, it underlines Swiss Re Capital Markets’ ongoing commitment to the public sector and embodies Swiss Re’s mission to make the world more sustainable.”
