World Bank Partners with Jamaica for Catastrophe Bond Renewal

The World Bank has joined forces with Jamaica to provide financial protection against named storm events through a newly priced catastrophe (cat) bond totaling $150 million. This marks the renewal of the World Bank's 2021 cat bond for Jamaica, making Jamaica the first small island state to independently sponsor such a bond, according to a World Bank statement.

Jamaica faces significant exposure to tropical cyclones, and the cat bond is a component of the country's multilayered disaster risk financing strategy, alleviating the fiscal burden of natural disasters and enabling swift government responses in times of crisis, according to the World Bank statement.

The bonds feature a parametric structure, ensuring prompt availability of funds to finance insurance payouts in the event of severe tropical cyclone occurrences. The triggering of payouts is contingent upon named storm events meeting predefined criteria for location and severity as per the bond terms. The issuance attracted investments from 15 global investors, allowing funding for catastrophe insurance to Jamaica for four hurricane seasons.

Dr. Nigel Clarke, minister of finance and the public service, Government of Jamaica, said, "Jamaica is pleased to have sponsored the second catastrophe bond in the international capital markets protecting Jamaica against natural disasters with the much-appreciated support and assistance of the World Bank. Consistent with our National Natural Disaster Risk Financing policy, we seek to ensure the availability of fiscal resources to enable an immediate response to emergency expenditures that could arise from a direct hit by a high-intensity hurricane. This catastrophe bond covers hurricane seasons 2024, 2025, 2026, and 2027 and complements other disaster risk financing instruments that we have in place."

Jorge Familiar, vice president and treasurer of the World Bank, said, "Through its comprehensive disaster risk strategy, of which this cat bond renewal plays a critical part, Jamaica is proactively protecting its fiscal position against risk in a manner that could become a model for other countries vulnerable to natural catastrophe risk."

Lilia Burunciuc, country director for Caribbean countries at the World Bank, said, "The need for the Caribbean to prepare for disaster impacts cannot be overstated, as it is one of the most vulnerable regions globally."

Jointly structured by Aon Securities and Swiss Re Capital Markets, with AIR Worldwide serving as the risk modeler and calculation agent, the cat bond will be listed on the Hong Kong Exchange (HKEX), facilitating global access to disaster risk financing instruments.