The Government of Jamaica will resume working with the World Bank and other multi-lateral groups in launching a catastrophe bond next year to increase its disaster insurance protection.

Jamaica had been planning a catastrophe bond issuance for this year to enhance its disaster insurance arrangements but this was forcibly delayed with the onset of the COVID-19 pandemic, which brought great financial market volatility. This resulted in Jamaica’s first catastrophe bond issuance to be put on hold.

The development of the catastrophe bond, which has been a work-in-progress for some years now is said to be back on the drawing board even with Jamaica’s priority being a swift economic recovery after the COVID-19 pandemic. It is anticipated that Jamaica’s catastrophe bond should be in place before the start of the 2021 hurricane season.

Jamaica got quite far down the line with the catastrophe bond having secured the support of the UK and Germany, through the Green Climate Fund, and the United States through the United States Agency for International Development (USAID). The partnership is completed by the World Bank, which acted as the adviser and placement agent.

The support partners would fund the premiums for the placement of Jamaica’s first catastrophe bond, which was slated to be in place before the beginning of the 2020 hurricane season. However, the timing of the pandemic escalation worsened the situation, as the catastrophe bond markets froze to new issuances.

This resulted in Jamaica pulling the catastrophe bond for the time being given the unfavourable market conditions. In spite of this, Jamaica remains committed to expanding its disaster insurance protection and intends to continue working with the World Bank in having the catastrophe bond in place as soon as practical.

Economic recovery after COVID-19 remains the main focus of the government for now, but disaster insurance and resilience is high on the agenda and likely to remain so given the current active hurricane season projected in the future. 

Finance Minister Dr Nigel Clarke explained that while the priority now is for economic recovery, one of the first orders of business for the newly elected government is strengthening of the country’s disaster risk insurance framework. This is in order to ensure that the country has the capital and liquidity it needs when major natural catastrophes strike.

“We will be further capitalising our Contingencies Fund over the course of this term and, with the help and assistance of our multilateral partners, such as the World Bank, procuring catastrophe insurance in the event of a natural disaster,” Clarke told the Jamaica Information Service.

According to Clarke, “being a sovereign catastrophe bond issued with the assistance of the World Bank, it is likely to be parametric in nature if it does come to market over the months before the 2021 hurricane season”.