Jamaica Catastrophe Bond Has Now Triggered, Government Says

Jamaica’s catastrophe bond has now triggered as a result of the fallout from Hurricane Melissa, the government said.

“Over the next few weeks we’ll get more details into what the payout is,” , minister of education, skills, youth and information, said in a briefing from the prime minister’s office on Friday.

Jamaica’s $150 million cat bond, which was arranged by the World Bank, is designed as the ultimate backstop to help provide funds to pay for only the most extreme weather events. The last time a weather-related cat bond paid out in full was in connection with Hurricane Ian in 2022, when several bonds suffered a 100% loss in principal, according to Artemis, a data provider specialized in insurance-linked securities.

The wreckage caused by Hurricane Melissa in Jamaica is expected to cost insurers $1 billion to $3 billion, according to property intelligence company Cotality. Insured losses represent just a fraction of the total property damage, though, which some estimates indicate may reach $7.7 billion for Jamaica alone.

“What’s important to note is that we are not dependent on the insurance payouts,” Morris Dixon said. Even so, the funds available “will never be enough to do the restoration and even to do the relief work right now,” she added.

The structure of Jamaica’s cat bond combined with the intensity of Hurricane Melissa have paved the way “for the largest and fastest disaster relief payout” in the island’s history, David Panton, chairman of Atlanta-based Panton Equity Partners and a former Jamaican senator, said in an emailed comment to Bloomberg.

“Funds will flow in weeks, not months, giving the government critical capital for lifesaving relief, infrastructure repair, and future resilience,” he said.

Jamaica, which the World Bank estimates is the third most-exposed country to natural catastrophes, has built up several layers of disaster-risk financing, including pre-arranged credits and parametric insurance. Its cat bond sits at the top of the insurance tower as protection against extreme events.

“Jamaica faces extreme weather events nearly every year, making it one of the most-exposed sovereigns to natural disasters,” Moody’s wrote in a note dated Oct. 29. “Hurricane Melissa is expected to trigger a sharp, though temporary, contraction in Jamaica’s real GDP, driven by disruptions in tourism, agriculture, and infrastructure.”

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