Finance minister sees interest in Caribbean catastrophe bond
Jamaica plans to reissue its current catastrophe bond when it matures at the end of this year’s hurricane season in December.
The bond provides up to $185 million in disaster insurance payouts to Jamaica if named storms and hurricanes meet certain thresholds. Finance Minister, Dr Nigel Clarke, who made the disclosure told Reuters in an interview, “Jamaica will certainly reissue our bond, even if we don’t have anyone else to come with us. But interest has been indicated and we’ll take it from there.
He did not indicate any specific countries, which would take up the bond nor the intended amount of subscription, which would be sought. In the meantime, Dr Clarke continues to see the idea of a Caribbean catastrophe bond in which other regional countries would participate not just Jamaica.
Selling regional catastrophe bond idea
In fact, Dr Clarke has declared that he is seeing “definite interest” from other Caribbean countries to join in issuing a regional catastrophe bond that would protect their budgets from hurricanes and spread investor risk across more countries. He has been trying to sell the regional bond idea to Barbados, The Bahamas and other countries that are seeing increased hurricane activity and intensity due to climate change.
Combining forces with other countries would diversify investor risk and lower issuance costs. Jamaica launched its current catastrophe bond in 2021. It was designed and facilitated by the World Bank, which holds the principal in trust to be paid out in the event of a disaster to pay for immediate repairs and assistance that would otherwise strain its budget.
World Bank President, Ajay Banga is now in Jamaica on his first foreign trip since taking office on June 2 to promote his agenda to expand the bank’s anti-poverty role into climate finance, tells Reuters that he supports the catastrophe bond idea for the Caribbean. He is quoted by Reuters as saying, “These bonds allow you to plan in advance. Why do you wait for the catastrophe to happen and then do something? Why don’t we give you the peace of mind that this exists for you?”
Working closely with new World Bank boss
Dr Clarke indicated that he intends to work closely with Banga on this and other initiatives to make Jamaica a more resilient economy. The Jamaican Finance Minister wants to use the World Bank’s expertise to help “crowd-in” over $1.5 billion in private investments over the medium term through public-private partnerships in transport, sanitation and information technology infrastructure using the country’s post-COVID fiscal stability and strong recovery to attract foreign investors.
He aims to use the World Bank’s knowledge base to help redesign Jamaica’s education system to boost worker skill levels, deepen the social safety net and digitize government services to make their delivery more efficient. Dr Clarke points out that the World Bank can help Jamaica in boosting its growth potential by deepening its tourism industry and diversifying its economy as a destination for the “near-shoring” of North American supply chains that is underway.
He declared that Jamaica aims to use its location to become a logistics hub.