Idea floated yesterday, as World Bank Group/IMF Spring Meetings starts

Durrant Pate/Contributor

Finance Minister Dr Nigel Clarke is seeking to persuade Caribbean leaders to join Jamaica in creating a regional catastrophe bond, as a means of securing disaster risk financing for the region.

He posited that the World Bank has shown its willingness to assist in such a venture, as has already been done with Jamaica, which developed its own catastrophe bond with the help of a number of European countries and international financiers.

Clarke is encouraging Barbados and other Caribbean states to join Jamaica in creating a regional catastrophe bond with assistance from the World Bank.

He floated the idea yesterday, as he took part in a panel discussion on day one of the World Bank Group/IMF Spring Meetings on the topic ‘Overcoming Debt, Generating Growth’. While he did not provide details of the plan, the finance minister articulated that policy framers experts from Kingston would be seeking to get the rest of the Caribbean interested in a catastrophe bond.

The suggestion for a regional catastrophe bond also comes as the Government of Barbados seeks to raise some US$5 trillion through the Bridgetown Initiative to assist vulnerable countries affected by climatic events. Among other things, the Bridgetown Initiative is proposing a reform of the International Monetary Fund (IMF) and World Bank, the establishment of a global fund that mobilizes private finance and financial reserves of rich nations to mitigate climate change shocks.

This, is in addition to the restructuring of sovereign debt to free up finances and prevent fiscal crises in small-island developing states and other low and middle-income countries. This initiative has provision for special loan clauses that allow for the suspension of payments when a country is hit by a natural disaster or pandemic, freeing up millions of dollars for governments to spend on rebuilding efforts.

Addressing the meeting, Clarke advised: “One of the things we are trying to work on is to get other countries in our region interested in a catastrophe bond. So instead of Jamaica doing it on its own, and we did this for the demonstration effect, we have been having dialogue, with the World Bank’s assistance, with other countries in the region.”

He did not tell the audience which countries discussions had been started.

“In this era where climate change has gathered such attention and focus, if we were to go to the market with a single catastrophe bond that covers the region the pricing would be better and the coverage would be higher, and that would be an innovation in that particular space,” the Jamaican finance minister said.

Jamaica’s catastrophe bond

Jamaica launched its first catastrophe bond in 2021 which saw the country securing US$185 million of disaster insurance protection from the capital markets with the assistance of the World Bank. Those bonds were issued through the capital risk programme of the World Bank’s lending arm – the International Bank for Reconstruction and Development (IBRD).

Payouts will be triggered when a named storm event occurs and certain parametric criteria are met.