Cat bond to narrow Jamaica’s natural disaster financing gap: World Bank

Work continues on the first catastrophe bond for Jamaica and the World Bank has highlighted how the soon to be launched transaction will help to narrow the Caribbean nations natural disaster financing gap.

As yet, the World Bank’s catastrophe bond for Jamaica has not come to market, but it is expected within the coming two months or so, in advance of the peak of the 2021 hurricane season.

Jamaica’s catastrophe bond has been a work-in-progress for some years now, as we’ve documented regularly, but was forcibly delayed due to the Covid-19 pandemic in 2020, as financial market volatility from the coronavirus outbreak put the Caribbean island nations’ first cat bond issuance on-hold, Jamaica’s finance minister previously said.

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Jamaica: World Bank cat bond still underway. Gets CCRIF rainfall payout for Zeta & Eta

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Jamaica continues to work with the World Bank on a first catastrophe bond for the country the Finance Ministry has said and reflecting the importance of disaster risk financing, in recent weeks it has received a roughly $3.5 million payout under its parametric CCRIF insurance coverage.

The payout comes after the torrential rainfall from tropical cyclones Zeta and Eta impacted the Caribbean island nation triggered the parametric excess rainfall protection that Jamaica has.

The CCRIF SPC (formerly known as the Caribbean Catastrophe Risk Insurance Facility) provides excess rainfall parametric insurance coverage, as well as parametric risk transfer for peak perils such as hurricanes and earthquakes.

Jamaica still aims for catastrophe bond with World Bank support

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The Government of Jamaica will continue to work alongside the World Bank and other multi-lateral groups to increase its disaster insurance protection this year, even though its priority is a swift economic recovery after the Covid-19 pandemic.

Jamaica had been planning a catastrophe bond issuance for this year, to enhance its disaster insurance arrangements.

The cat bond deal, which has been a work-in-progress for some years now, as we’ve documented regularly, was forcibly delayed by the Covid-19 pandemic, as financial market volatility due to the coronavirus outbreak put the Caribbean island nations’ first cat bond issuance on-hold, the country’s finance minister previously said.

Jamaica readies for first cat bond, already budgeting for its renewal

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Despite the fact a catastrophe bond for Jamaica has not yet come to market, after receiving support to pay premiums for the in-development first issuance the Caribbean island nation is already preparing to budget for its future renewal.

Jamaica’s government has been working towards sponsoring its first catastrophe bond for at least two years, with assistance from the World Bank.

Our latest two updates on Jamaica’s progress towards becoming a cat bond sponsor discussed the support provided by the World Bank in risk modelling for the perils to be covered, and funding the country has received to help in paying cat bond premiums to investors.

Caribbean earthquake could prompt CCRIF coverage assessment

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A powerful magnitude 7.7 earthquake struck the Caribbean yesterday in the afternoon local time, swaying buildings as far away as Miami, Florida and causing some localised damage to countries including the Cayman Islands, Jamaica and Cuba.

There have been no immediate reports of casualties and damage in the region appears relatively light.

However, the quake could result in an assessment of the parametric catastrophe insurance policies provided by the CCRIF SPC (formerly known as the Caribbean Catastrophe Risk Insurance Facility) and perhaps its reinsurance coverage, as its modelled loss trigger calculation process may be required to run, given the severity of the earthquake event.

Jamaica cat bond & disaster insurance talks continue to advance

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The Jamaican government continues to discuss disaster risk financing instruments including catastrophe bonds with bilateral and multi-lateral partners and is developing a Public Financial Management Policy for Natural Disaster Risk.

Jamaica has benefitted from a borrowing agreement with the IMF, but that expires later this year leaving a gap in the financial provisions the Caribbean country would have in the event of a major natural disaster.

As a result, Jamaica has been engaging with entities ranging from the World Bank to the Inter-American Development Bank, with insurance, reinsurance and capital markets backed sources of protection all under consideration.

India & Jamaica both in ILS related disaster risk financing talks

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Both India and Jamaica have been having discussions on disaster risk financing and risk transfer solutions, including ILS, with the World Bank and other international organisations, as the two countries look to put in place measures to ensure funding is quickly available when the most impactful natural disasters strike.

It’s no secret that Jamaica has been looking at how better to protect itself against the frequent tropical storms, hurricanes and also extreme rainfall threats that it faces.

With natural disasters across 2001 to 2010 having cost Jamaica more than $1.2 billion and a single hurricane having the potential to drive hundreds of millions of economic costs to the island nation, having sufficient risk financing, insurance and risk transfer in place is key.

Cat bonds a key disaster insurance option for Jamaica: Minister

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In a recent speech, the Minister of Finance and the Public Service for Jamaica, Dr. Nigel Clarke, explained that the country needs better disaster risk financing structures in place, with catastrophe bonds cited as one option that may be suitable.

Cat bonds have come up in government discussion in Jamaica a number of times, as the countries exposure to natural catastrophe risks, particularly hurricanes, is seen as so extreme that a major event could severely impact its economic development and finances.

Hence having robust natural disaster financing in place is seen as key and with a line of credit through a Precautionary Stand-By Arrangement with the IMF set to come to an end in 18 months time, the country is now looking to put in place disaster risk management plans to ensure ongoing financial liquidity when the worst occurs.