catastrophe swap

The Inter-American Development Bank (IDB) has announced plans to support Latin American and Caribbean nations in issuing catastrophe bonds and swaps, as part of a broader initiative aimed at strengthening financial resilience against natural disasters.

The World Bank is working with four countries from the Organization of Eastern Caribbean States Commission (OECS), Dominica, Grenada, Saint Lucia, and Saint Vincent and the Grenadines, to strengthen their climate resilience and with three risk transfer options being explored, a catastrophe swap, catastrophe bonds, or securing more parametric insurance.

Hong Kong has now listed the first catastrophe bond notes on its stock exchange, with the World Bank issued $350 million of IBRD – Chile 2023 cat bond notes now housed on the Hong Kong Exchanges and Clearing Limited (HKEX).

The World Bank is “extremely pleased” with the response from investors and reinsurance markets to the recent placement of $630 million of catastrophe bonds and catastrophe swaps to protect Chile, Jorge Familiar, Vice President and Treasurer told us in our latest Artemis Live video.

For Chile, the completion of the largest single country catastrophe bond and swap transaction ever executed by the World Bank has resulted in $630 million of protection against earthquake risks, an important step towards more resilient public finances, the country’s Finance Minister Mario Marcel has said.

Chile has secured $630 million of earthquake insurance cover through its World Bank IBRD issued arrangement, with $280 million of catastrophe swaps to add to the recently priced $350 million IBRD – Chile 2023 catastrophe bond.

The Asian Development Bank (ADB) has launched its first pilot disaster insurance scheme in the Philippines and has also approved a $500 million loan for the country that is contingent on a natural disaster or public health emergency occurring.

Discussions on the use of insurance, reinsurance and capital market products for disaster risk financing are rising up the agendas of international meetings focused on the Asia-Pacific region.

Hiscox Re ILS deployed capacity into the recent renewal of the Philippines sovereign parametric disaster insurance facility, adding to the amount of third-party capital now backing this risk transfer program.

The recently renewed Philippines parametric natural disaster insurance cover was completed at $390 million in size, around double the prior year, and the World Bank has confirmed that work is underway to issue a catastrophe bond to extend disaster protection for the country.