IBRD CAR 111-112

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IBRD CAR 111-112 – At a glance:

  • Issuer: IBRD CAR 111-112
  • Cedent / sponsor: Pandemic Emergency Financing Facility (PEF)
  • Placement / structuring agent/s: Swiss Re Capital Markets is joint structuring agent and sole bookrunner. Munich Re Capital Markets is joint structuring agent and co-manager. GC Securities is co-manager.
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: Pandemics
  • Size: $320m
  • Trigger type: Parametric
  • Ratings: NR
  • Date of issue: Jul 2017

IBRD CAR 111-112 – Full details:

This is the first catastrophe bond issuance that will provide financial backing and insurance protection to the World Bank’s Pandemic Emergency Financing Facility (PEF).

The pandemic cat bonds are being issued through the International Bank for Reconstruction and Development (IBRD) global debt facility, while the beneciciary of the coverage is the PEF, which will receive injections of cash to support its work in assisting countries to stem or stop the spread of qualifying pandemics that occur.

The IBRD will issue two series of catastrophe-linked Capital At Risk notes (CAR Series 111 and CAR Series 112) through its debt issuance facility, which will be sold to qualified investors and insurance-linked securities (ILS) specialists.

The notes will provide parametric protection linked to the occurrence of specific pandemics, we understand, with any triggered default and payout designed to benefit the Pandemic Emergency Financing Facility (PEF) and provide the needed liquidity and capital to help stricken countries or regions in their response and recovery.

The proceeds from selling the two tranches of IBRD Capital At Risk notes will collateralize swap agreements that will be linked to the parametric payment terms for each tranche of notes.

The parametric trigger for both tranches of notes will be based on World Health Organisation (WHO) reported deaths and cases that hit the covered areas, which for some perils is global, others a subset of countries. The coverage is per occurrence and will run for a three-year term, we’re told.

The IBRD will issue a Series 111 Class A tranche of notes which we understand to be targeting at least $75 million of coverage that will be linked to the outbreak of pandemic flu or coronavirus events, we understand. The Class A notes have an attachment probability of 4.92% and an expected loss of 3.57%, with the pricing marketed at 7.25% to 8%, we’re told.

The Series 112 Class B tranche targets $25 million of cover or greater, we hear, but these notes are exposed to a wider range of pandemic perils, Coronavirus, Crimean Congo Hemorrhagic Fever, Filovirus, Lassa Fever and Rift Valley Fever. This tranche has an attachment probability of 9.44%, an expected loss of 7.74% and price guidance of 12.25% to 13%.

Interest payments to investors will be funded by donor contributions to the PEF Trust Fund and any payouts due to the either series of notes parametric triggers being breached by a pandemic will result in capital flowing to the PEF for it to use in helping affected countries slow the spread of an event and recover.

The World Bank’s first pandemic cat bond issuance to back the PEF is supported by major reinsurance players Swiss Re, Munich Re and reinsurance broker Guy Carpenter, with risk modelling from AIR Worldwide.

These notes will back the developing Pandemic Emergency Financing Facility (PEF) which is an initiative designed to rapidly disburse capital to countries in the event of deadly pandemics, with backing from risk transfer provided by the catastrophe bonds.

Update 1:

We’re told that the target size for the transaction has been lifted with as much as $400 million mooted, and a lower-end target of at least $175 million sought.

A Series 111 Class A tranche of notes had launched targeting at least $75 million of coverage that will be linked to the outbreak of pandemic flu or coronavirus events, but this tranche is now targeting from $150 million to $200 million of cover. This tranche had launched with price guidance of 7.25% to 8%, but this has dropped to below that range now at 7% to 7.25%, we understand.

A Series 112 Class B tranche was targeting $25 million of cover or greater, and the target is now set at between $25 million and $150 million, we hear. This tranche covers a wider range of pandemic perils, including Coronavirus, Crimean Congo Hemorrhagic Fever, Filovirus, Lassa Fever and Rift Valley Fever. As a riskier tranche of protection, these notes were offering price guidance of between 12.25% to 13%, but this has been lowered and tightened to 11.75% to 12.25%.

Update 2:

The targeted size range has narrowed to $175 million up to $350 million, we understand, while the spread guidance has dropped even further, now sitting well below where the initial pricing had been mooted.

The Class A tranche is aiming for $150m to $250m of notes issued. On pricing, this tranche has now dropped even further to 6.9% to 7%.

The Series 112 Class B tranche is now aiming for between $25m and $100m in size, we’re told. The pricing has now dropped again and narrowed to 11.5% to 11.75% we understand.

Update 3:

The transaction finally priced to offer $325 million of notes.

The Class A tranche of notes was priced to offer $225 million of notes to investors, with pricing of 6.9% we understand. The Class B, riskier tranche, priced offering $95 million of notes at a bond coupon and risk margin of 11.5%.

It’s also noteworthy that the World Bank sold $105 million of pandemic linked catastrophe swaps to capital market investors as well, in order to increase the reach of the transaction by helping other investors that preferred the derivative structure to access the risk as well.

The World Bank revealed the investor breakdown for the distribution of the bonds, see below:

Distribution by Investor Type


Class A

Class B

Dedicated Catastrophe Bond Investor61.7%35.3%
Asset Manager20.6%16.3%
Pension Fund14.4%42.1%
Distribution by Investor LocationClass AClass B

Update, May 2018:

The Ebola outbreak in the Democratic Republic of Congo, Africa may prove to be an eligible event under the terms of the Series 112 Class B notes issued in this pandemic cat bond. The notes cover Ebola as a filovirus, but require a number of factors to be met, in terms of the number of deaths caused, the rate of spread and also the disease crossing borders, before any payout would be triggered.

Update, December 2018:

The number of confirmed deaths in the Congo Ebola disease outbreak has now passed the trigger point for a 30% payout of the $95 million of IBRD Capital-at-risk Series 112 Class B notes, but the notes have not yet been triggered as the other factors such as geographic spread across borders still haven’t been met.

Update, June 2019:

The risk that the World Bank’s pandemic catastrophe bond transaction triggers and makes a payout appears to have risen significantly, as the World Heath Organisation (WHO) reports that the Ebola outbreak in the Democratic Republic of Congo has now spread across the border to Uganda.

With almost 1,400 confirmed deaths now, should the $95 million of Class B notes be triggered it would result in a 60% loss of principal.

However, for any payout to be confirmed the spread still needs to meet a growth rate, in terms of the number of new cases confirmed. At this time no official determination has been made.

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