World Bank Returns to the Cat Bond Market Providing Financial Protection to Jamaica

WASHINGTON, April 27 -- The World Bank issued the following news release:

The World Bank (International Bank for Reconstruction and Development, or IBRD, AAA/Aaa), priced a catastrophe (cat) bond that finances US$150 million of insurance coverage for the Government of Jamaica against named storm events. This is the renewal of the World Bank's 2021 cat bond for Jamaica, which was the first small island state to independently sponsor a cat bond.

Jamaica is exposed to tropical cyclone events that threaten not only lives and livelihoods, but also the country's economic outlook. For Jamaica, the cat bond forms part of a multi-layered disaster risk financing strategy reducing the fiscal burden of natural disasters while allowing the government to respond swiftly.

The cat bonds were issued under IBRD's "capital at risk" notes program, which can be used to transfer risks related to natural disasters and other risks from developing countries to the capital markets. The bonds' parametric structure makes funds readily available to finance insurance payouts to Jamaica if a severe tropical cyclone event occurs. Payouts to Jamaica will be triggered when a named storm event meets the criteria for location and severity set forth in the bond terms. The cat bond attracted 15 global investors, providing the funding for catastrophe insurance to Jamaica for four hurricane seasons.

"Jamaica is pleased to have sponsored the second catastrophe bond in the international capital markets protecting Jamaica against natural disasters with the much appreciated support and assistance of the World Bank. Consistent with our National Natural Disaster Risk Financing policy, we seek to ensure the availability of fiscal resources to enable an immediate response to emergency expenditures that could arise from a direct hit by a high intensity hurricane. This catastrophe bond covers hurricane seasons 2024, 2025, 2026 and 2027 and complements other disaster risk financing instruments that we have in place. We express our gratitude for the Hong Kong Insurance Authority who supported the transaction financially," said Dr. Nigel Clarke, Minister of Finance and the Public Service, Government of Jamaica.

"We are proud to have partnered with Jamaica for the second time on a cat bond transaction. Over recent years, Jamaica has done a very impressive job with its fiscal consolidation. Through its comprehensive disaster risk strategy, of which this cat bond renewal plays a critical part, Jamaica is proactively protecting its fiscal position against risk in a manner that could become a model for other countries vulnerable to natural catastrophe risk," said Jorge Familiar, Vice President and Treasurer of the World Bank.

"The need for the Caribbean to prepare for disaster impacts cannot be overstated, as it is one of the most vulnerable regions globally. Important to this process is having available resources and the World Bank is pleased to support Jamaica's catastrophe bond, which will help the country respond and rebuild quickly in the event of an impact," said Lilia Burunciuc, Country Director for Caribbean Countries, World Bank.

Aon Securities and Swiss Re Capital Markets were the joint structuring agents and joint bookrunners for the transaction. AIR Worldwide is the risk modeler and calculation agent.

The cat bond will be listed on the Hong Kong Exchange (HKEX), which is the second time the World Bank lists a cat bond in Hong Kong.

"Aon Securities LLC and Aon Securities (Hong Kong) Ltd. are privileged to work with the World Bank in its latest capital market transaction supporting the Government of Jamaica. With a strategic emphasis on initiatives, including risk management and resiliency, aimed at the positive economic response to climate change and finance emergency response, the Government of Jamaica continues to demonstrate exemplary leadership in the capital markets arena. We are deeply committed to contributing to this mission," said Paul Schultz, CEO Aon Securities.

"Swiss Re Capital Markets is proud to have partnered with the World Bank and the Government of Jamaica to successfully bring the World Bank's second catastrophe bond issuance to market supporting the Government of Jamaica. This transaction mirrors the ground-breaking trigger mechanics of the first issuance in 2021 that allowed for faster payout post event and have since become a market standard for disaster relief transactions. Once again, it highlights Swiss Re Capital Markets' continued commitment to the public sector and embodies Swiss Re's mission to make the world more resilient," said Jean-Louis Monnier, CEO of Swiss Re Capital Markets Corporation.

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Catastrophe Bonds Investor Distribution

Geographic Distribution......Investor Type

Europe...40%...ILS Fund...66%

North America...43%...Insurer / Reinsurer...1%

Bermuda...14%...Asset Management...33%

Asia / Australia...3%

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Summary Bond Terms and Conditions

Type of Note...CAR 136

Issuer...World Bank (International Bank for Reconstruction and Development, IBRD)

Covered Perils...Named Storm

Size (Aggregate Nominal Amount)...US $150 million

Trigger Type...Parametric, Per Occurrence

Trade Date...April 25, 2024

Settlement Date...May 2nd, 2024

Scheduled Maturity Date...December 29, 2027

Issue Price...100%

Coupon (per annum)...Compounded SOFR + Funding Margin + Risk Margin

Funding Margin ...0.19% per annum

Risk Margin (Risk Period)...7.00% per annum

Redemption Amount...The Outstanding Nominal Amount reduced by any Principal Reductions and/or Partial Repayments

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Disclaimers

Net proceeds of the bonds described herein are not committed or earmarked for lending to, or financing of, any particular projects or programs. Payments on the bonds described herein are not funded by any projects or programs.

This press release is not an offer for sale of securities of the International Bank for Reconstruction and Development ("IBRD"), also known in the capital markets as "World Bank". Any offering of World Bank bonds described herein will take place solely on the basis of the relevant offering documentation including, but not limited to, the Prospectus, the Prospectus Supplement, the Final Terms and any related legal documentation. Investing in the bonds described herein is speculative and involves a high degree of risk including the risk of a total loss of principal amount. The bonds will be offered and sold, and may be reoffered and sold, only to investors who (i) are "qualified institutional buyers" within the meaning of Rule 144A under the United States Securities Act of 1933, as amended, and (ii) are residents of and purchasing in, and will hold the bonds in, a permitted U.S. jurisdiction or a permitted non-U.S. jurisdiction (and meet the other requirements set forth under "Notice to Investors" in the Prospectus Supplement). The bonds will not transferable except in accordance with the restrictions described under "Notice to Investors" in the Prospectus Supplement.

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Original text here: https://www.worldbank.org/en/news/press-release/2024/04/25/world-bank-returns-to-the-cat-bond-market-providing-financial-protection-to-jamaica