Jamaica pleased with second World Bank cat bond, Hong Kong support: Minister of Finance

The Caribbean island nation of Jamaica is “pleased” to have secured coverage from its second World Bank supported catastrophe bond, Finance Minister Dr. Nigel Clarke has said, also citing his countries gratitude for financial support from Hong Kong, presumably through its ILS Grant Scheme.

As Artemis reported yesterday, the latest catastrophe bond to be issued by and with the support of the World Bank, the IBRD CAR Jamaica 2024 cat bond, has now been priced to provide Jamaica $150 million of named storm disaster insurance protection on a parametric basis over four hurricane seasons.

As we explained, at $150 million the coverage is a smaller amount than secured back in 2021 with Jamaica’s first World Bank cat bond and the notes have priced at a higher level as well, reflective of changed market conditions over the last three years.

But, Jamaica has elected to have the IBRD CAR Jamaica 2024 catastrophe bond notes listed on the Hong Kong Stock Exchange, which has presumably qualified it for the ILS Grant Scheme offered by the country, which will assist in paying some of the issuance costs related to cat bond sponsorship.

Dr. Nigel Clarke, Minister of Finance and the Public Service, Government of Jamaica, commented on the pricing of the notes yesterday, “Jamaica is pleased to have sponsored the second catastrophe bond in the international capital markets protecting Jamaica against natural disasters with the much appreciated support and assistance of the World Bank. Consistent with our National Natural Disaster Risk Financing policy, we seek to ensure the availability of fiscal resources to enable an immediate response to emergency expenditures that could arise from a direct hit by a high intensity hurricane.

“This catastrophe bond covers hurricane seasons 2024, 2025, 2026 and 2027 and complements other disaster risk financing instruments that we have in place.”

Dr. Clarke added that, “We express our gratitude for the Hong Kong Insurance Authority who supported the transaction financially.”

The $150 million of IBRD CAR Jamaica 2024 catastrophe bond notes will be issued by the World Bank’s International Bank for Reconstruction and Development (IBRD) through the capital-at-risk notes program.

They will finance US $150 million of insurance coverage for the Government of Jamaica against named storm events across four hurricane seasons and represent a renewal of the World Bank’s 2021 cat bond for Jamaica, the first for a small island state.

Jorge Familiar, Vice President and Treasurer of the World Bank also said, “We are proud to have partnered with Jamaica for the second time on a cat bond transaction. Over recent years, Jamaica has done a very impressive job with its fiscal consolidation. Through its comprehensive disaster risk strategy, of which this cat bond renewal plays a critical part, Jamaica is proactively protecting its fiscal position against risk in a manner that could become a model for other countries vulnerable to natural catastrophe risk.”

Lilia Burunciuc, Country Director for Caribbean Countries, World Bank added, “The need for the Caribbean to prepare for disaster impacts cannot be overstated, as it is one of the most vulnerable regions globally. Important to this process is having available resources and the World Bank is pleased to support Jamaica’s catastrophe bond, which will help the country respond and rebuild quickly in the event of an impact.”

Utilising a parametric trigger, the Jamaica cat bonds can make their funds swiftly available to finance insurance payouts to Jamaica, if a severe tropical cyclone event occurs.

Payouts will be triggered if a named storm event meets the criteria for location and severity set forth in the bond terms. You can read more about that in our Deal Directory entry.

Some 15 global investors backed this second catastrophe bond for Jamaica, with the cat bond distribution split as 66% ILS funds, 1% re/insurers and 33% asset managers.

Geographically, the Jamaica cat bonds are being distributed 43% to the United States, 40% Europe, 14% Bermuda and 3% to Asia and Australia.

Aon Securities and Swiss Re Capital Markets acted as the joint structuring agents and joint bookrunners for the second Jamaica catastrophe bond transaction. AIR Worldwide is the risk modeler and calculation agent.

Paul Schultz, CEO Aon Securities commented, “Aon Securities LLC and Aon Securities (Hong Kong) Ltd. are privileged to work with the World Bank in its latest capital market transaction supporting the Government of Jamaica. With a strategic emphasis on initiatives, including risk management and resiliency, aimed at the positive economic response to climate change and finance emergency response, the Government of Jamaica continues to demonstrate exemplary leadership in the capital markets arena. We are deeply committed to contributing to this mission.”.

Jean-Louis Monnier, CEO of Swiss Re Capital Markets Corporation also said, “Swiss Re Capital Markets is proud to have partnered with the World Bank and the Government of Jamaica to successfully bring the World Bank’s second catastrophe bond issuance to market supporting the Government of Jamaica. This transaction mirrors the ground-breaking trigger mechanics of the first issuance in 2021 that allowed for faster payout post event and have since become a market standard for disaster relief transactions. Once again, it highlights Swiss Re Capital Markets’ continued commitment to the public sector and embodies Swiss Re’s mission to make the world more resilient.”

The second Jamaica catastrophe bond will be listed on the Hong Kong Exchange (HKEX), so this becomes the second time that one of the World Bank facilitated cat bonds is listed in Hong Kong, after the $350 million IBRD – Chile 2023 cat bond notes were listed there in early 2023.

As said, the Jamaican government will have been able to reduce some of the costs of issuance for its second catastrophe bond through the listing in Hong Kong presumably qualifying it for the countries ILS Grant Scheme, which can be particularly beneficial for sovereign sponsors.

As we reported yesterday, the IBRD CAR Jamaica 2024 catastrophe bond was priced at $150 million in size, while the spread was finalised at 7%, which was the upper-end of the initial price guidance.

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.