Jamaica is pushing for a regional catastrophe bond

WASHINGTON, CMC – Jamaica is seeking the assistance of regional countries to establish disaster risk financing for the region by issuing a regional catastrophe bond with help from the World Bank.

Finance Minister Dr. Nigel Clarke participating in a round-table discussion on “Overcoming Debt, Generating Growth” as part of the Spring meetings of the International Monetary Fund/World Bank, on the topic “Overcoming Debt, Generating Growth,” did not, however, provide details of the plan.

But he told the panelists that Kingston would seek to get the rest of the Caribbean interested in the initiative.

“One of the things we are trying to work on is to get other countries in our region interested in a catastrophe bond. So instead of Jamaica doing it on its own, and we did this for the demonstration effect, we have been having dialogue, with the World Bank’s assistance, with other countries in the region.

“In this era where climate change has gathered much attention and focus, if we were to go to the market with a single catastrophe bond that covers the region, the pricing would be better, and the coverage would be higher, and that would be an innovation in that particular space,” Clarke said.

The move to establish the new bond follows Jamaica’s first catastrophe bond in 2021, resulting in the country securing US$185 million of disaster insurance protection from the capital markets with the assistance of the World Bank.

The bonds were issued through the capital risk program of the World Bank’s lending arm – the International Bank for Reconstruction and Development (IBRD), with payouts being triggered when a named storm event occurs and specific parametric criteria are met.

The suggestion for a regional catastrophe bond also comes as the Government of Barbados seeks to raise an estimated five trillion US dollars through the Bridgetown Initiative to assist vulnerable countries affected by climatic events.

Among other things, the Bridgetown Initiative is proposing a reform of the International Monetary Fund (IMF) and World Bank, the establishment of a global fund that mobilizes private finance and financial reserves of rich nations to mitigate climate change shocks, and the restructuring of sovereign debt to free up finances and prevent fiscal crises in small-island developing states and other low and middle-income countries.