‘Successful issuance of catastrophe bonds proof of strong investor confidence in Philippine’

MANILA, Philippines — The government’s successful issuance of insurance-linked securities (ILS) or catastrophe bonds (CAT bonds) is a reflection of the market’s strong confidence in the Philippine economy, as well as their support for the country’s disaster resiliency efforts, according to the Department of Finance (DOF).

Last Monday, the Philippine government, through the World Bank issued two tranches of CAT bonds to provide the country with a $75 million in insurance coverage against earthquakes and $150 million protection against tropical cyclones for three years.

The issuance was met with strong investor interest, as it diversified the current pool of CAT bonds in the market, according to the Bureau of the Treasury (BTr).

“The successful float of the Philippines’ first ever ILS or CAT bonds is one more proof of the strong investor support of the international business community for the Philippines amid the sweeping reforms being implemented by the Duterte administration to sustain the growth momentum while climate-proofing the country,” Finance Secretary Carlos Dominguez said in a statement.

He said that this level of investor confidence reflects not only the attractiveness of the bond issuance, but also the investors’ support for the disaster resilience agenda of the Duterte administration.

“This maiden ILS float is just one of the many innovative structures and projects that the government is undertaking to improve the resilience against natural calamities of the Philippines, which is among the world’s economies most vulnerable to climate change,” he said.

In October, it was announced that the Philippines will tap international financial markets to provide protection against earthquake and tropical cyclone risks through the issuance of CAT bonds.

The Treasury said this served as the first CAT bond issuance for the Philippines and for any Asian sovereign. The securities were also the first of its kind to be listed in the Singapore Exchange (SGX) or in any Asian exchange.

“This instrument was years in the making, and we are grateful to the World Bank and our structuring agents for ensuring a successful deal. We would also like to thank the Monetary Authority of Singapore (MAS) for their invaluable support of this endeavor and for the grant that they gave the Philippines to defray some of the expenses of this transaction,” National Treasurer Rosalia de Leon said.

“With our exposure to natural disasters, we cannot just sit idly by and do nothing. This instrument is a way for us to proactively protect the fiscal health of our government against natural disasters,” she said.

GC Securities, Munich Re and Swiss Re served as joint structuring agents for the transaction, while AIR Worldwide worked as the modeling agent and event calculation agent.

Payouts from the insurance facility will be made when an earthquake or tropical cyclone meets the predefined criteria under the bond terms.