World Bank issues ‘catastrophe-linked’ bonds for PH

The World Bank issued two tranches of“catastrophe linked" financial instrument aiming to provide the Philippines with financial protection for losses from earthquakes and tropical cyclones for three years.

In a statement, the Washington-based financial institution said the World Bank issued catastrophe bonds on behalf of the government to insure the Philippines against natural disaster-related losses up to $225 million.

According to the World Bank, the financial protection is up to $75 million for losses from earthquakes and $150 million against losses from tropical cyclones for three years.

The bonds were issued under International Bank for Reconstruction and Development (IBRD) has “capital at risk” notes program, which can be used to transfer risks related to natural disasters and other risks from developing countries to the capital markets.

Payouts will be triggered when an earthquake or tropical cyclone meets the "predefined criteria" under the bond terms.

The Philippines is among the most disaster-prone countries in the world. In 2013, supertyphoon “Yolanda” resulted in the loss of 6,300 lives and caused an estimated $12.9 billion in damages, or about 4.7 percent of the country’s gross domestic product (GDP).

“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 longterm partnership between the World Bank and the Philippines government,” Jingdong Hua, World Bank vice president and treasurer said.

Mara K. Warwick, World Bank Philippines country director said they have been working with the Philippines government for the last eight years to help strengthen the country’s resilience against natural disasters.

“Through the intermediation of the World Bank, these CAT bonds allow the Philippines to transfer natural disaster risks to the capital markets while enabling the authorities to respond quickly to the needs of citizens when calamities strike,” Warwick said.