ADB aims to expand catastrophe bond usage across Asian regions: Kessler

The Asian Development Bank (ADB) is actively promoting catastrophe bonds for sovereign disaster risk financing across the region, but Thomas Kessler noted last week that this will require cooperation across governments, research and modelling institutions, insurers and the ILS investor base.

Speaking in Bermuda at the Convergence 2026 conference last week, Thomas Kessler, Principal Disaster Risk Insurance & Finance Specialist at the Asian Development Bank (ADB) explained that replicating its first successful catastrophe bond issuances takes time and the engagement of insurance-linked securities market participants.

As we reported back in April 2026, the Asian Development Bank’s (ADB) first catastrophe bonds delivered $160 million of capital market-backed parametric earthquake and extreme precipitation disaster risk financing, evenly split between the Kyrgyz Republic and Tajikistan.

These were the first transactions issued by the ADB’s own treasury facilities and proved the concept of issuing what it terms Disaster Relief Bonds (DRB), benefiting two of its members and securing them efficient disaster risk financing from institutional and insurance-linked securities (ILS) investors.

Importantly, Kessler explained that these catastrophe bonds come with a very clear mandate to deliver any payouts that are triggered during their coverage terms to provide social protection for specific groups.

This is not typical of catastrophe bonds, as they more frequently are used to provide reinsurance from the capital markets to insurer or reinsurer sponsors.

But in this case the Asian Development Bank designed the risk transfer to have a clear delivery of funding to groups expected to be most affected by the covered natural disaster events.

Kessler explained that the cat bonds were structured to have defined payout procedures, that aim to direct funds to vulnerable people and also provide investors with traceable impact reporting.

The parametric triggers themselves are designed to reflect affected populations, to ensure delivery of payout liquidity to support the recovery of those in the impacted regions who need it most.

As said, the payouts are designed to reach vulnerable households in the covered countries, with that delivered through existing national social protection systems, with the added benefit of reporting and auditing to support traceability for the investors that allocated to the bonds.

Kessler told the Convergence 2026 audience, “We actually set up SOPs, standard operating procedures, with many ministries in the countries. And we made sure that children, women, elderly people, people with disabilities, who are registered under the national social protection scheme, would benefit from the payouts, and we set in place reporting and auditing procedures in order to make sure that the household would get the money in case of a payout.”

This is an innovative way to both evidence the positive impact of any payout, while also ensuring it goes to those most in need of financial support when disaster strike.

It shows a way ILS structures can be designed to provide auditable impact, something that aligns well with the motivations of any sovereign sponsor and with many investors.

Kessler said, “This was highly appreciated by most of the investors, because it’s really the first time that we increased the transparency and the traceability of such an instrument, and we provided the investors with measurable SDG impact.

“Another unique feature is the triggers of these parametric bonds. So both earthquake and extreme precipitation were linked to the number of affected people, because they are eventually the beneficiary.”

Kessler also highlighted that the ADB created a web interface through which both the government’s and the investors could look at the modelling and monitor the impacts of perils, again an innovative feature of these cat bond deals.

Having completed its first catastrophe bond issuances, the ADB is now keen to replicate these deals and encourage other regional governments to look to disaster risk transfer as a valuable source of protection.

“ADB will further promote disaster relief bonds in Asia and the Pacific. We want to replicate them, take the momentum, and we’d like to have a regional approach,” Kessler explained.

“So we look at areas such as the Pacific Islands, which are faced with above average expected loss. We’re looking at Southeast Asia, the ASEAN, which combines large economies, further developed and also very small. We’re looking at the Hindu Kush Himalaya, you have seen the events in Nepal, Bhutan. And of course, we’re going to continue to work in in the CAREC region.

“So with this, we will provide opportunities for investors to diversify their portfolios geographically as well as into new risks, and we also hope that investors will get acquainted to new regions.”

Kessler closed by saying, “We can’t do it without cooperation between government, between academia, research institutions, science, modellers, structurers and the investors. MDBs, like the Asian Development Bank, can bring them all together.

“This leaves me with the saying: If you want to go fast you can go alone, but if you’re going to go far let’s go together, and let’s make an impact which is urgent.”