The World Bank has issued two tranches of catastrophe-linked bonds that will insure the Philippines against disaster-related losses of up to $225 million.
The CAT bonds will provide the Philippines with a maximum financial protection of $75 million for earthquake-related losses and $150 million for tropical cyclone-related losses over three years. The bonds were issued under the International Bank for Reconstruction and Development's (IBRD) «capital at risk» notes program. Payouts will be triggered when the aforementioned types of disasters meet predefined criteria.
GC Securities, a division of MMC Securities LLC, and Swiss Re were joint structuring agents, joint bookrunners and joint managers. Munich Re was a joint structuring agent, placement agent and joint manager.
Natural Disasters
According to the release, many Asian nations are highly vulnerable to natural disasters with the Philippines globally ranked amongst the top disaster-prone ones. For example, a devastating typhoon in 2013 resulted in 6,300 deaths and $12.9 billion in damages, about 4.7 percent of Philippine’s GDP.
«Many countries in Asia are highly vulnerable to natural disasters, which makes finding innovative, capital markets solutions a major priority to address the impact on their economies,» said Jingdong Hua, World Bank's vice president and treasurer.
«The World Bank CAT bonds for the Philippines are the first to be sponsored by the government of an Asian country and the result of a close and long-term partnership between the World Bank and the Philippines government.»
