Asian Development Bank – Kyrgyz Republic 2026

The Asian Development Bank (ADB) is offering its first catastrophe bond notes, with two transactions covering earthquake and extreme precipitation risks in the Kyrgyz Republic and Tajikistan.

These are the first catastrophe bond that the Asian Development Bank (ADB) is issuing, with the notes coming to market via one of its own securities issuance programs.

The Asian Development Bank (ADB) will issue the cat bond notes directly under its Global Medium-Term Note (GMTN) program.

This page refers to the issuance of Kyrgyz Republic Disaster Relief Capital at Risk Notes, with the risk capital set to support the Kyrgyz Republic’s Ministry of Finance, providing funding to support its disaster risk financing strategy.

This offering of Kyrgyz Republic Disaster Relief Capital-At-Risk-Notes seeks $75 million of risk transfer protection for the country.

The notes will be offered and sold to investors, with the proceeds from their sale set to effectively act as the collateral to the risk transfer. But, like some World Bank issues, the proceeds from the sale of the capital-at-risk notes will be utilised by the ADB in its operations, while the risk transfer agreements between the ADB and the Kyrgyz Republic will mean the ADB is obliged to fund any payouts in an amount equal to any principal reduction under the parametric risk transfer arrangements.

Under the agreement, we understand the Kyrgyz Republic will also be obliged to utilise any payouts received from the ADB under the risk transfer agreement to support vulnerable persons and communities.

The Kyrgyz Republic catastrophe bond is set to provide it with a targeted $75 million source of parametric disaster risk transfer to run across a roughly three-year term, until the end of April 2029, we understand.

The $75 million source of protection is split through risk transfer sub-limits, as a targeted $65 million of parametric earthquake protection and $10 million of parametric extreme precipitation protection.

The parametric disaster risk transfer protection is structured on a per-occurrence basis across the full three-year term for each covered peril, with the cat bond designed to payout on the occurrence of extreme and damaging earthquake or precipitation induced disaster events for the covered nation.

On the earthquake side, the parametric trigger is designed with a cat-in-a-box type structure, taking into consideration factors such as location, intensity and depth of earthquake events. Any payouts following an earthquake would be 0%, 25%, 50%, 75% or 100% of the notes’ principal, depending on the severity of an event and the payout rate derived under the parametric trigger arrangement, we are told.

We assume this also means there could be, for example, a 25% payout earthquake event and the remaining 75% of principal would stay on-risk for the rest of the catastrophe bond term for the country, so the quake sub-limit can provide coverage for a number of occurrences in that way.

Notably, the Global Earthquake Model Foundation (Fondazione GEM) has provided the expert risk analysis for the earthquake exposure under the ADB cat bond, the first time any catastrophe bond has been brought to market using one of its models. AIR Worldwide (Verisk) is acting as the calculation agent for earthquake events, sources said. Earthquake event data will be reported by the GFZ, which is a German research centre for geosciences.

It’s also worth noting that with the Kyrgyz Republic and Tajikistan being neighbouring countries, there could be single quake events that affect one or both of the ADB cat bonds and there are boxes in the cat-in-a-box structure that span across borders as well.

On the extreme precipitation side of the limit, the risk is presented as unmodelled, we understand. However, we’re told investors are furnished with a number of scenario type events and an explanation of how historical precipitation related events have unfolded in the covered countries and how they might affect either cat bond.

The extreme precipitation parametric trigger utilises a gridded approach, with daily rainfall amounts adjusted for snow and summed up across as much as a 21 day period to derive an index value and whether any payout is due.

We’re told the extreme precipitation sub-limit can only be tapped once and it also appears that if the parametric index value breaches the trigger it would be paid out in full, so it does not seem there could be a partial payout of the precipitation coverage, just one full payout or none for an event.

Sources said that JBA Risk Management, a catastrophe risk modelling firm with a specialism in flood and precipitation events, is acting as the calculation agent for the extreme precipitation sub-limit parametric triggers. The ECMWF is said to be the reporting agency for extreme precipitation data using its ERA5 data.

The targeted $75 million of Asian Development Bank – Kyrgyz Republic 2026 catastrophe bond capital-at-risk notes come with an initial attachment probability of 3.883%, an initial expected loss of 2.296% and they are being offered to investors with guidance for a risk margin (or risk interest spread) of between 5.25% and 6%, we understand.

Also read about the Tajikistan 2026 catastrophe bond which was issued at the same time as this Kyrgyz Republic deal.