The World Bank has priced a catastrophe bond that finances US$200m of insurance coverage against hurricanes for Jamaica.
This replaces the previous cat bonds that financed US$150m coverage that was paid out to Jamaica following Hurricane Melissa, which hit the island in October last year.
The World Bank issued a press release on the matter yesterday.
The transaction was oversubscribed by investors, which supported the upsizing of its initial target amount.
The bond builds on the experience of the catastrophe bonds issued by the World Bank in 2021 and 2024, to support Jamaica.
For the 3 year 2024 catastrophe bond, a full payout to Jamaica was triggered by Hurricane Melissa in 2025.
The pre-agreed parametric triggers based on the storm’s path and intensity were met, demonstrating how these instruments can deliver rapid financial support after major disasters.
For Jamaica, the catastrophe bond and related risk transfer agreement form part of a multi-layered disaster risk financing strategy, helping to manage the fiscal impact of severe hurricanes while ensuring timely access to financial resources following extreme events.
The catastrophe bond provides pre-arranged financing for protection with regard to low-frequency, high-impact hurricane events, complementing other instruments such as budget reserves, contingent financing, and insurance.
The catastrophe bond was issued under the international bank for reconstruction and development, “capital at risk” notes programme, which enables member countries to transfer disaster-related risks to global capital markets.
Under the transaction structure, the World Bank issues the bond and enters into a risk transfer agreement with the Jamaican government, which pays a premium for the coverage based on the terms achieved in the capital markets.
