Durrant Pate/Contributor

Jamaica has secured US$150 million of parametric insurance coverage for four hurricane seasons from the World Bank.

This second cat bond secured through the World Bank represents the renewal of the first, with Jamaica at the time being the first small island state to independently sponsor a cat bond. Aon Securities and Swiss Re Capital Markets jointly structured the transaction, with AIR Worldwide as the risk modeller. 

At US$150 million, the coverage is smaller than the US$185 million secured from Jamaica’s first cat bond issued in 2021. This 2024 cat bond attracted 15 global investors, providing the funding for catastrophe insurance to Jamaica for four hurricane seasons. 

The bonds’ parametric structure makes funds readily available to finance insurance payouts that will be triggered when a named storm event meets the criteria for location and severity outlined in the bond terms.

Bond to be listed on Hong Kong Stock Exchange 

Jamaica has elected to have the 2024 catastrophe bond listed on the Hong Kong Stock Exchange, which is the second World Bank-backed listing after Chile’s US$350 million 2023 cat bond in early 2023.

For Jamaica, the bonds are part of a multi-layered disaster risk financing strategy reducing the fiscal burden of natural disasters while allowing the government to respond swiftly.

Utilising a parametric trigger, the Jamaica cat bonds can make their funds swiftly available to finance insurance payouts to Jamaica, if a severe tropical cyclone event occurs. Payouts will be triggered if a named storm event meets the criteria for location and severity set forth in the bond terms

Government pleased

Finance Minister Nigel Clarke expressed the Government’s optimism in securing this second cat bond from the World Bank saying, “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,” he continued.

This catastrophe bond covers hurricane seasons 2024, 2025, 2026 and 2027 and complements other disaster risk financing instruments that we have in place. We express our gratitude for the Hong Kong Insurance Authority who supported the transaction financially,” Clarke elaborated.