Jamaica returns for new $150m World Bank cat bond to replace coverage triggered by Melissa

The Government of Jamaica is back in the catastrophe bond market again with the support of the World Bank, targeting $150 million of parametric named storm and hurricane protection from an IBRD CAR Jamaica 2026 issuance, designed to replace its coverage that was triggered by hurricane Melissa, Artemis has learned from sources.

This will be the third catastrophe bond sponsored by Jamaica, as the country had first secured parametric hurricane disaster risk protection from the capital markets through the $185 million IBRD CAR 130 cat bond in 2021.

Jamaica’s government followed that deal up with a $150 million renewal through the IBRD CAR Jamaica 2024 issuance in May 2024, again with the support of the World Bank for both of those issuances.

That 2024 cat bond for Jamaica had a more than three year term, so that it provided four hurricane seasons of protection and was not due for maturity until late 2027, but the devastating impacts of hurricane Melissa in October 2025 triggered the notes and Jamaica’s government benefited from a full payout of the $150 million within weeks, to aid in the countries recovery.

We reported a few weeks ago that Jamaica’s government has been discussing how it might renew its parametric disaster insurance for 2026, although at the time there was no mention of the countries catastrophe bond.

So it’s encouraging to now learn from sources that Jamaica is looking to maintain its robust and multi-layered disaster risk financing program, which sees its parametric cat bond sitting at the top.

As with Jamaica’s previous catastrophe bonds, the notes will be issued by the World Bank’s International Bank for Reconstruction and Development (IBRD), under its global debt issuance facility and the Capital-At-Risk notes program.

The offering sees a single $150 million tranche of catastrophe-linked capital-at-risk notes being offered to cat bond investors, with the proceeds from their sale set to collateralize a risk transfer agreement between Jamaica and the IBRD.

The notes will provide Jamaica with parametric disaster insurance protection against Atlantic named storm risks, so for named storms and hurricanes.

These IBRD Jamaica 2026 cat bond notes will provide the Government of Jamaica with a capital markets supported source of parametric per-occurrence protection that will run across a term covering four hurricane seasons, with maturity expected in May 2030, our sources have told us.

Like the previous catastrophe bonds for Jamaica, the parametric trigger is structured to respond based on storm location and minimum central pressure, using data from the best track files produced by the National Hurricane Center’s automated tropical cyclone forecasting system.

One change worth noting is that in this case Moody’s RMS will be the modelling and calculation agent, where the previous Jamaica cat bonds were supported by Verisk’s AIR.

The cat bond’s calculation process will see specific event parameters taken on any storm that passes through the parametric boxes that sit over Jamaica, which are in a similar construction to the 2024 deal, we understand.

The event parameters would be based on the calculated central pressure figure and also the storm track, while Jamaica and the surrounding Caribbean Sea are divided up into a series of parametric boxes. Different payout factors apply, depending on which box a storm tracks into and the minimum central pressure it has, while any payouts would be made on a linear sliding scale, with a minimum of 30% of the cat bond’s principal, running up to a full 100% payout available depending on the event parameters and severity, we are told.

We understand any hurricane with a minimum central pressure of 900mb or lower could trigger a 100% payout on passing through any of the parametric boxes, while pressures higher than that would result in different payout percentage amounts, dependent on the weighting factors for the specific parametric trigger zones a hurricane passed through.

The $150 million of Jamaica 2026 catastrophe bond notes that the IBRD is set to issue come with an initial attachment probability of 3.86%, an initial expected loss of 2.48% and are being offered to investors with a risk margin guidance in a range from 6.5% to 7.25% (the price guidance range), sources said.

For comparison, Jamaica’s 2024 cat bond came with an initial expected loss of 1.5% at issuance and priced to pay investors a risk margin of 7%. However, given the change in risk model used, it is perhaps not a simple comparison, although clearly market pricing was meaningfully higher in general at the time of the last Jamaica cat bond.

It is encouraging to see Jamaica returning to replace a core component of its disaster insurance protection from the capital markets through a new parametric catastrophe bond issuance.

Jamaica is a sophisticated user of disaster insurance and risk financing instruments and clearly sees the value this parametric structure provides, having experienced the impacts of an extreme storm in Melissa and benefited from a payout under the 2024 cat bond notes.

You can read all about this IBRD CAR Jamaica 2026  catastrophe bond and more than 1,000 other cat bond transactions in the extensive Artemis Deal Directory.