Morocco targets regulatory framework for insurance securitization, including cat bonds

The government of Morocco is now aiming to prepare a regulatory framework to allow for the securitization of insurance risks, including through catastrophe bonds, as the country seemingly aims to support issuance as well as to be a beneficiary of risk transfer to the capital markets.

Morocco’s ministry of finance published its Finance Bill for fiscal year 2027 this week and while the wide-ranging budgetary document deals with numerous of the countries needs, disaster risk financing and insurance is a notable feature of it.

It’s particularly notable to see the mention of Morocco having a goal to construct its own regulatory framework for the securitization of insurance risks, as a way to bring third-party capital more directly into the country to support natural disaster, catastrophe and climate risk transfer.

Modernising the financial and capital market infrastructure in Morocco is a key goal and the country recognises the opportunities presented by regulating for more efficient financing.

By both modernising and greening Morocco’s capital markets the country aims to increase its fiscal stability and sustainability.

Evolving regulatory frameworks can help in diversifying sources of capital Morocco believes, with one area of focus being insurance securitization.

The new Finance Bill for fiscal year 2027 calls for the preparation of a regulatory framework for the securitization of insurance risks, including catastrophe bonds.

The goal is to be able to provide Morocco with instruments for covering climate risks and diversifying sources of financing, the government explained.

There are no specific details available as to what this regulatory work may entail, whether Morocco wants to develop its own financial market structures to support domestic issuance of insurance-linked securities, or whether this is more aimed at enabling the country to benefit from offshore ILS and catastrophe bonds.

Either way, it’s the latest signal that Morocco’s government recognises the important contribution that efficient access to third-party institutional capital could make to its disaster risk financing needs.

Moroccan law has included mentions of insurance risk securitisation before, but the necessary regulatory texts to make this feasible in the country had not existed. Perhaps now, this regulatory work planned for 2027, could enable the country to become a catastrophe bond issuer.

We assume the goal is to enable Morocco to develop its own mechanism for securitization of insurance risks, rather than being a play to become an ILS domicile.

As we’ve said before, for a government to use its own securities issuance facilities and regulations to issue catastrophe bonds for the benefit of its country would be a market-first, but it is a strategy that makes sense to us.

Domestic capital markets and treasury facilities support issuance of numerous kinds of securities, so why not ones that enable the transfer of insurance risks to global investors?

Of course, Morocco is already working closely with the World Bank on a $400 million program that aims to boost its resilience against climate, disaster, and cyber risks.

In that ongoing project, catastrophe bonds and other forms of insurance risk transfer including parametric triggers have already been mooted as part of the program outcomes.

In addition, Morocco has already had parametric disaster and climate insurance arrangements in-force for a number of years, with their benefits been realised as its government received a $275 million payout from its parametric earthquake insurance policy after the devastating earthquake that occurred in 2023.