Building Resilience into Development: Pioneering Earthquake Bonds Reinforce World Bank Leadership in Providing Financial Protection Against Natural Disasters

Stocks and Financial Services Press Releases Friday February 9, 2018 08:22
Washington, DC--9 Feb--World Bank

Washington, DC, February 8, 2018—The World Bank, the leading provider of natural disaster risk insurance for emerging and developing countries, has issued catastrophe bonds that will provide a total of US$1.36 billion in earthquake coverage to Chile, Colombia, Mexico and Peru.

Disasters hurt the poor and vulnerable the most. By incorporating disaster risk management into development planning, countries can save lives and build foundations that support long-term recovery and sustainable development. Obtaining insurance helps governments to manage the financial impact of disaster and climate shocks.

Through the World Bank earthquake bonds, Chile receives US$500 million, Colombia US$400 million, Mexico US$260 million and Peru US$200 million in insurance coverage. The bonds, which are issued by the World Bank, do not contribute to the countries' debt. If an event occurs that triggers a payout from the bond, the country receives the payout. The investors lose part or all the capital.

The insurance offers protection to government budgets. It is an important complement to emergency funds, budget reserves, contingent credit lines, and other financial instruments governments use in the aftermath of natural disasters.

The bonds follow a two-year partnership between the World Bank and the four countries, all members of the Pacific Alliance. In April 2016, the countries jointly approached the World Bank to explore whether they could obtain insurance through a catastrophe bond to protect themselves from the financial impact of natural disasters.

In response to this request, the World Bank worked with the four countries to assess how catastrophe bonds could be designed to most effectively transfer risk to the capital markets. In the preparatory phase, the World Bank worked with Chile, Colombia and Peru on specialized modeling and analysis to enable the governments to evaluate their earthquake risk. Mexico also shared its extensive experience in using catastrophe bonds to complement its broader disaster risk management efforts. This work benefited from the strong support and financial backing of the Swiss State Secretariat for Economic Affairs (SECO).

The bonds are the successful outcome of this collaboration, and form part of a broader strategy to support all World Bank member countries in addressing natural disaster risk. In addition to offering instruments for financial protection, the World Bank provides technical and financial support for risk assessments, risk reduction, preparedness, and resilient recovery and reconstruction through the Global Facility for Disaster Reduction and Recovery and the Disaster Risk Financing and Insurance Program.

"Strengthening the resilience of our partner countries is a key objective of Switzerland's economic cooperation and we are proud to partner with the World Bank in assisting Middle Income Countries in building their resilience against natural disasters" said Raymund Furrer, head of SECO's Economic Cooperation and Development Division.

"Helping our client manage risk and build resilience to external shocks is a strategic priority for the World Bank," said Arunma Oteh, World Bank Vice President and Treasurer. "This historic transaction cements the World Bank's role as a pioneer in leveraging capital market instrument to build resilience, and showcases our unique ability to bring together sovereigns for a market transaction that transfers risk and will help support countries when the unforeseen does occur."

"When there are people just one disaster away from poverty, managing risk is a development priority," said Jorge Familiar, World Bank Vice President for Latin America and the Caribbean. "These Pacific Alliance catastrophe bonds are an example of the innovative contributions that stem from the Bank's partnership with Latin America and the Caribbean."


Latest Press Release

mai welcomes petroleum transport provider VL on May 21

Market for Alternative Investment (mai) will list V.L. Enterprise pcl, a marine transportation service provider for petroleum and chemical products, on May 21, under the ticker symbol "VL". The company has a market capitalization at its initial public...

ThomasLloyd Launches First Open-ended Public Infrastructure Fund and Signs Global Fund Distribution Agreement With Allfunds

The global investment and advisory firm ThomasLloyd announced that it is cooperating with Allfunds, one of the world's leading distributors of investment funds. Following the signing of a global framework agreement relating to ThomasLloyd´s fund...

Ichitan Group unveils high Q1 net profit with 247.1% YoY growth, aiming for continuous growth in Q2 through regional exports

Ichitan Group Public Company Limited (SET:ICHI) today announces a strong net profit growth of 247.1% YoY in the first quarter worth 114.2 million baht, accounting for net profit margin of 8.7%. Such profit is derived from management efficiency and a...

KBank opens the exhibition booth at Money Expo Bangkok To offer special promotions under KBank Always With You concept

KBank will make its presence felt at Money Expo Bangkok from May 16-19, 2019 by offering special promotions, discounts, bonuses, giveaways and privileges for homebuyers looking for mortgage loans, together with the best interest rates and conditions for...

Fitch Rates EXIM#s USD Senior Notes #BBB+(EXP)#

Fitch Ratings has assigned an expected rating of 'BBB+(EXP)' to Export-Import Bank of Thailand's (EXIM, BBB+/Stable) five-year senior unsecured notes. The notes will be issued under the bank's USD1.5 billion medium-term note (MTN) programme. EXIM plans...

Related Topics