Jamaica shielded in catastrophe bond, a landmark for the Caribbean

A World Bank catastrophe bond will provide the Government of Jamaica with financial protection of up to US$185 million against losses from named storms for three Atlantic tropical cyclone seasons ending in December 2023.

The bond will be settled on Friday and will commence at midnight that day, Finance and the Public Service Minister Dr Nigel Clarke said.

Jamaica’s is the first government in the Caribbean and the first of any small island state to independently sponsor a catastrophe bond, also known as a cat bond. Jamaica was one of the 16 countries in the Caribbean Catastrophe Risk Insurance Facility that benefited from the World Bank’s first ever cat bond in 2014.

The bonds were issued under the World Bank’s ‘capital at risk’ notes programme, which can be used to transfer risks related to natural disasters and other risks from developing countries to the capital markets.

Payouts to Jamaica will be triggered when a named storm event meets the criteria for location and severity specified in the bond terms. The transaction includes a reporting feature resulting in a quick payout calculation within weeks of a qualifying named storm.

Strengthening Jamaica’s resilience

“We are pleased to be able to support this transaction and bring together so many different partners all committed to strengthening Jamaica’s resilience to tropical cyclones. We especially thank the capital market investors for their support and participating in this important mission,” Jingdong Hua, vice-president and treasurer, World Bank, said.

Clarke said that the Government had strategically prioritised disaster risk financing to mitigate the adverse fiscal impact of hurricanes and other natural disasters.

Clarke described the catastrophe bond as “an indispensable layer of disaster risk financing that complements our multilayered approach”.

The minister said that Jamaica benefited from the vast technical resources of the World Bank and from the strength of its balance sheet.

He also expressed gratitude to the United Kingdom, German, and United States governments.

Jamaica’s geographical position puts its macroeconomic outlook under threat during the six-month hurricane season that runs from June 1 to November 30.

The cat bond transaction received financial support through the United States Agency for International Development, the World Bank’s Disaster Protection Programme funded by the United Kingdom, as well as the Global Risk Financing Facility.