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Chile targets doubling in size of World Bank quake cat bond to $300m


The Republic of Chile has lifted the target for protection from its new IBRD – Chile 2023 parametric earthquake catastrophe bond to as much as $300 million, a potential doubling in size for the World Bank IBRD issued transaction.

Chile catastrophe bond 2023Artemis reported first that the Republic of Chile was aiming to secure at least $150 million of parametric earthquake disaster insurance protection through the issuance via the World Bank’s multilateral development bank, the International Bank for Reconstruction and Development.

Now, sources have told us that the target size for this new Chile catastrophe bond issuance is being pitched at between $250 million to as much as $300 million, so a possible 100% upsizing from the initial launch to investors.

With investor appetite for new cat bond issues strong at this time, demonstrated again in this issuance, Chile could benefit from an enlarged slice of capital markets backed disaster insurance protection for major earthquake events that strike the country.

On this basis, the IBRD is now set to issue between $250 million and $300 million in floating rate Catastrophe-Linked Capital at Risk Notes, that will be sold to investors to deliver the capital to support a parametric earthquake insurance arrangement with the Republic of Chile, we understand.

The Chile cat bond notes will feature a parametric trigger and provide their protection on a per-occurrence basis, across a three-year term.

To read more details on the structure of the Chile catastrophe bond transaction and its parametric trigger please see our Deal Directory entry.

At the same time as looking to upsize this cat bond, the pricing has also been lowered to the bottom of the initial spread guidance, we’re told.

The now proposed as $250 million to $300 million of Chile earthquake notes come with an initial modelled attachment probability of 1.48%, an initial base expected loss of 1% and were initially marketed to investors with pricing guidance of 4.75% to 5.5%.

Now, the upsized amount of notes are being offered with final price guidance at the bottom end of that range, at 4.75%, sources have told us.

At which level the multiple-at-market would be 4.75 times the initial base expected loss, which is relatively keen in the current pricing environment.

But, with Chile earthquake risk, on a parametric basis, a strong diversifying opportunity for cat bond funds and investors in the current market environment, that is perhaps not surprising.

It’s encouraging to see the Republic of Chile’s new catastrophe bond being well-received, with the upsizing and pricing indicating strong execution as well.

You can read all about this new IBRD – Chile 2023 catastrophe bond in the extensive Artemis Deal Directory.

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