World Bank believes it could grow its cat bond issuance 400% in five years

The World Bank has ambitious plans to expand its use of catastrophe bonds for member countries by roughly 400% over the next five years, growing the amount of World Bank issued cat bonds outstanding to as much as $5 billion, Bloomberg has reported.

Today, the World Bank has $1.02 billion of cat bonds outstanding that have been issued through its IBRD Capital-at-risk notes program.

According to Michael Bennett, the structured finance head at the World Bank Treasury, the Bank would like to see this grow to around $5 billion over the next five years, a roughly 400% increase.

Bennett said that this is “ambitious but realistic”, noting that cat bond market conditions are now in a better place than a year ago.

Bennett also told Bloomberg that the World Bank has a couple of new cat bonds in the works, although did not provide details.

“The market is in a better condition now than it was at the end of 2022,” Bennett explained, although the premiums that need to be paid currently are still well up on those that cat bond sponsors were asked for a few years back.

Bennett also told Bloomberg that the World Bank still has an appetite to expand its catastrophe bond program to help members source disaster risk financing for other perils, such as floods and droughts.

The most recent World Bank issued cat bond was a $350 million earthquake issuance for Chile in March this year, before which was a $185 million hurricane bond for Jamaica in 2021.

Watch our video interview from May with Jorge Familiar, Vice President and Treasurer of the World Bank, who explained to us that client country demand for catastrophe bonds and risk management arrangements are expected to rise, while he also expects that capital markets will be there to support these issuances.