Jamaica to renew catastrophe bond. Seeing interest in regional cat bond: Report

The Finance Minister of Jamaica Nigel Clarke has told Reuters that his country intends to renew its catastrophe bond coverage when it reaches maturity at the end of this year and will do so as a stand-alone cat bond for Jamaica, or as a regional Caribbean wide one if others want to participate.

As we’ve reported before, Jamaica has been promoting its experience as a catastrophe bond sponsor and wants to encourage other nations in the region to join it in sponsoring a Caribbean catastrophe bond, to cover multiple countries.

Caribbean nations have been discussing this possibility with the World Bank for a while now, with a multi-country catastrophe bond for the region seen as an efficient way to access disaster risk financing and insurance capacity from the capital markets.

Jamaica, having secured its own cat bond in 2021 with the assistance of the World Bank, has been speaking with other Caribbean countries about the potential benefits of this opportunity.

But the Jamaica catastrophe bond matures at the end of 2023 and its Finance Minister is committed to renewing it, Reuters report implies.

“Jamaica will certainly reissue our bond, even if we don’t have anyone else to come with us,” Nigel Clarke explained.

He has been speaking with countries such as the Bahamas and Barbados about the potential to sponsor a regional cat bond for the Caribbean, with “definite interest” said received.

The idea is to protect Caribbean country budgets from hurricane risk through the issuance of a cat bond that covers the region, or a number of the islands in it, while spreading that risk into the capital markets with the help of institutional investor capital.

“Interest has been indicated and we’ll take it from there,” Clarke told Reuters.

Of Jamaica’s cat bond, Clarke said, “It provides the financial protection that we need to make ourselves resilient to the effects of climate change and natural disasters.”

Joining with other Caribbean countries can help to diversify the risk for investors and also lower issuance costs, Clarke said.

World Bank President Ajay Banga also told Reuters that he supports the catastrophe bonds, 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?”

Banga praised Jamaica’s use of the catastrophe bond as a form of disaster insurance protection.

We first reported that Jamaica’s cat bond could grow to cover more countries back in 2022. It’s encouraging to hear that efforts to secure support for this continue, and also that Jamaica would plan to renew the important protection on its own.