Speaking with Artemis in a recent video interview, Jorge Familiar, Vice President and Treasurer of the World Bank explained that client country demand for catastrophe bonds and risk management arrangements will likely rise, while he also expects that markets will be there to support these issuances.
Jorge Familiar of the World Bank joined us in March 2023 for an Artemis Live interview to discuss the recent successful placement of catastrophe bonds and swaps to provide the Republic of Chile with $630 million of earthquake insurance protection.
During our conversation, we discussed the role of the World Bank in facilitating access to capital markets for its client countries, as well as the rising importance of risk management and transfer in a world where natural event frequency and severity is causing increasing economic impacts.
Familiar said that, “Risk management is an important element of development, it’s an important element of sustainability. If we think about, some types of natural disasters they are directly related to issues like climate change, and if anything, we will see higher intensity and higher frequency of disasters, unfortunately, and hence, countries need to be prepared.
“Cat bonds and reinsurance, these are tools that need to be available for countries to take care of these risks and to protect the hard-won gains in terms of development.”
Familiar explained that the World Bank is committed to these activities, seeing them as an important component of overall development discussions and increasingly a priority for countries as they look to protect economies from fiscal shocks.
“We certainly will be there for our client countries, and I do believe that there will be more demand,” Familiar said.
Adding that, “We have been doing innovative things that prove there is value to be added by putting together transactions like this one.
“What comes to mind is the case of Jamaica, not so long ago we helped Jamaica issue a cat bond and, in that case, donors supported Jamaica in the payment of the premium, in recognition of Jamaica’s efforts on the fiscal consolidation front.
“This is another example of how different elements of a development agenda come together in the execution of a market facing transaction in the cat bond space.”
Familiar sees the current global environment as one where discussions on risk and sustainability are only going to become more common and as a result the World Bank needs to keep risk management and instruments like catastrophe bonds as part of the discussion.
“Working for a development institution, I tend to look at both sides of the transaction, not just the execution in the markets, but also the dialogue with client countries,” he highlighted during the interview.
Adding, “I think that this is a good time to make this part of our development-related conversations and I do believe that the market will be there.
“There is value in World Bank sponsored cat bonds as well, so we would be very happy to partner with other countries and support them in navigating this space.”
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Sustainability is also a key focus and Familiar feels that catastrophe bonds, like other outcome-based financing solutions that the World Bank issues or sponsors on behalf of client countries, should prove attractive to investors as a result.
Familiar told us, “I believe that in these three areas, cat bonds, other types of risk management interventions, and outcome-based bonds, there is space and opportunity to do more.
“Another interesting element is that the foundation of all of these is the World Bank’s funding programme, so the proceeds of these bonds go to fund sustainable development.
“If investors are looking at creating impact and having impact, from a development point of view, from a perspective of creating positive externalities, the basic structure in which everything else is built, is a Sustainable Development bond.
“Then everything else is extra sustainability that is being created, so I think that these are interesting opportunities for investors as well.”
The full video interview is embedded below and can also be viewed in full, along with previous Artemis Live video interviews, over on our YouTube channel.
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All of our Artemis Live video interviews have a focus on reinsurance, ILS and the efficiency of risk transfer and can be accessed directly from our YouTube Channel.
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