Sunday, October 25, 2020
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PH raises $225M from WB’s CAT bonds


The Philippines has raised a total of $225 million or P11.42 billion by tapping the World Bank (WB)-issued catastrophe-linked or CAT bonds, National Treasurer Rosalia de Leon announced on Monday.

In an interview, de Leon told reporters that the government has generated financial protection of up to $75 million for losses from earthquakes and $150 million against losses from tropical cyclones for three years.

“It is all part of the disaster risk financing strategy of the government,” she said.


In a separate statement, WB explained the bonds were issued under the International Bank for Reconstruction and Development’s “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, it added.

The Washington-based multilateral lender highlighted the Philippines is among the most disaster-prone countries in the world. It recalled that 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.

“This instrument addresses the financing gap for immediate post-disaster needs for extremely high-risk events. It complements the government’s existing disaster risk financing mechanisms designed to ensure comprehensive financial protection for the Philippines,” de Leon said in the WB statement.

Meanwhile, WB Vice President and Treasurer Hua Jingdong noted the CAT bonds for the Philippines are the first to be sponsored by the government of an Asian country and is the result of a close and long-term partnership between the multilateral and the Philippine government.

WB Country Director Mara Warwick, on the other hand, said that through the intermediation of the institution, the CAT bonds can 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.

“This once again demonstrates the Philippines’ capability to develop innovative financial solutions to mitigate impacts of extreme climate and weather-related events as well as major earthquakes,” she said.

The World Bank said GC Securities, a division of MMC Securities LLC and Swiss Re were the joint structuring agents, joint bookrunners and joint managers. Also, Munich Re was the joint structuring agent, placement agent and joint manager, while AIR Worldwide was the risk modeler and calculation agent.


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