MANILA, Philippines — The World Bank has issued two tranches of catastrophe-linked bonds (CAT bonds) to provide the Philippines insurance against losses from earthquakes of up to $75 million and tropical cyclones for $150 million for three years.
The bonds were issued under the multilateral bank’s “capital at risk” notes
program, used to transfer risks emanating from natural disasters in developing countries to the capital markets.
Payouts from the insurance facility will be made when an earthquake or tropical cyclone meets the predefined criteria under the bond terms.
World Bank identifies the Philippines as among the most disaster-prone countries globally.
In 2013, the onslaught of Typhoon Yolanda killed 6,300 persons and inflicted damage of $12.9 billion corresponding to 4.7 percent of the country’s gross domestic product (GDP).
“The World Bank has been working with the Philippines government for the last eight years to help strengthen the country’s resilience against natural disasters,” said Mara Warwick, World Bank country director for the Philippines.
“Through the intermediation of the World Bank, these CAT bonds allow the Philippines to transfer natural disaster risks to the capital markets while enabling the authorities to respond quickly to the needs of citizens when calamities strike. This once again demonstrates the Philippines’ capability to develop innovative financial solutions to mitigate impacts of extreme climate and weather-related events as well as major earthquakes.”
For the bond issuances, GC Securities, a division of MMC Securities LLC, and Swiss Re were joint structuring agents, joint bookrunners and joint managers and Munich Re was a joint structuring agent, placement agent and joint manager.
AIR Worldwide is the risk modeler and calculation agent.
World Bank’s catastrophe bond issuance are majority held in Europe (58 percent. The rest are distributed as follows: North America (25 percent), Asia (13 percent), Bermuda (four percent).
By investor type, majority are held by asset management firms (50 percent). Other holders of these bonds are insurance-linked securities funds (29 percent), insurer/reinsurer (13 percent), and pension funds (eight percent).