Jamaica returns for $150m+ World Bank cat bond to cover four hurricane seasons
The Government of Jamaica has returned to the catastrophe bond market as anticipated, with an initial target to secure at least $150 million in parametric named storm disaster insurance protection from the capital markets through this IBRD CAR Jamaica 2024 cat bond, to cover the country over four hurricane seasons.
Jamaica had secured its first cat bond with the assistance of the World Bank back in 2021, with that arrangement providing parametric named storm and hurricane disaster insurance protection from the capital markets across three Atlantic wind seasons.
That $185 million IBRD CAR 130 cat bond transaction for Jamaica matured on schedule at the end of 2023 and we’ve reported a number of times about the country’s appetite to renew it.
In our last article on the subject, we explained that Jamaica was set to target four hurricane seasons of coverage with a renewal for its World Bank catastrophe bond.
Now, that renewal cat bond has emerged, Artemis can report, and as anticipated Jamaica will seek parametric named storm and hurricane protection to run through until late 2027.
The Government of Jamaica has again partnered with the World Bank and the IBRD to issue its second catastrophe bond.
The notes will be issued by the International Bank for Reconstruction and Development (IBRD) under its global debt issuance facility and the Capital-At-Risk notes program.
A single $150 million tranche of catastrophe-linked notes are being offered, to provide parametric disaster insurance protection against Atlantic named storm risks.
The notes will provide parametric per-occurrence protection to the Government of Jamaica over a term covering the four hurricane seasons, with maturity expected on December 29th 2027, we are told.
Similar to the now matured first cat bond covering Jamaica, the parametric trigger is based on storm location and minimum central pressure, using data from the best track files out of the NHC’s automated tropical cyclone forecasting system.
Specific event parameters will be based on the calculated central pressure figure and also the storm track, while Jamaica and the surrounding Caribbean Sea have been divided up into a series of parametric boxes. Different payout factors apply, depending on which box a storm tracks into and the minimum central pressure it has and payouts will be on a linear sliding scale, with a minimum of 30% of the cat bond’s principal, running up to a full 100% payout, we understand.
The $150 million of Jamaica cat bond notes issued by the IBRD come with an initial attachment probability of 2.34%, an initial expected loss of 1.5% and are being offered to investors with a risk margin guidance in a range from 6.25% to 7% (so the price guidance range).
The parametric trigger for the previous 2021 Jamaica cat bond issuance was therefore seemingly less risky, having had an expected loss of 1.52% and priced with a risk margin of 4.4%.
It’s good to see Jamaica returning to secure more disaster insurance protection from the capital markets through a parametric catastrophe bond structure.
The return of Jamaica had never been in doubt, given the strong statements made by its finance minister and the preparations the country has made in terms of its robust disaster risk financing framework.
But, at one stage, Jamaica had been discussing the potential for a regional catastrophe bond with other Caribbean island nations, but so far that idea hasn’t come to fruition.
It could still remain on the table though, as any multi-country Caribbean catastrophe bond could offer Jamaica earthquake cover perhaps, or a different risk level of parametric named storm protection. So we shouldn’t rule that possibility out for future years, just because Jamaica has opted to ensure it has some protection in place for the coming hurricane season.
You can read all about this IBRD CAR Jamaica 2024 catastrophe bond and more than 1,000 other cat bond transactions in the extensive Artemis Deal Directory.
