Barbados and other countries in the Caribbean could soon be asked to join Jamaica in its quest to secure disaster risk financing for the region through the issuance of a regional catastrophe bond with assistance from the World Bank.
Jamaica’s Minister of Finance Nigel Clarke floated the idea on Tuesday as he took part in a panel discussion on day one of the World Bank Group/IMF Spring Meetings on the topic Overcoming Debt, Generating Growth.
While he did not provide details of the plan, Clarke said authorities from Kingston would be seeking to get the rest of the Caribbean interested in a catastrophe bond.
“One of the things we are trying to work on is to get other countries in our region interested in a catastrophe bond. So instead of Jamaica doing it on its own, and we did this for the demonstration effect, we have been having dialogue, with the World Bank’s assistance, with other countries in the region,” he said, though not disclosing with which countries discussions had started.
“In this era where climate change has gathered such attention and focus, if we were to go to the market with a single catastrophe bond that covers the region the pricing would be better and the coverage would be higher, and that would be an innovation in that particular space,” he said.
This comes on the heels of Jamaica’s first catastrophe bond in 2021, which saw the country securing US$185 million of disaster insurance protection from the capital markets with the assistance of the World Bank. Those bonds were issued through the capital risk programme of the World Bank’s lending arm – the International Bank for Reconstruction and Development (IBRD).
Payouts will be triggered when a named storm event occurs and certain parametric criteria are met.
The suggestion for a regional catastrophe bond also comes as the Government of Barbados seeks to raise some US$5 trillion through the Bridgetown Initiative, to assist vulnerable countries affected by climatic events.
Among other things, the Bridgetown Initiative is proposing a reform of the International Monetary Fund (IMF) and World Bank, the establishment of a global fund that mobilises private finance and financial reserves of rich nations to mitigate climate change shocks, and the restructuring of sovereign debt to free up finances and prevent fiscal crises in small-island developing states and other low and middle-income countries.
This initiative has provision for special loan clauses that allow for the suspension of payments when a country is hit by a natural disaster or pandemic, freeing up millions of dollars for governments to spend on rebuilding efforts. (MM)
