World Bank gives natural disaster bonds to Mexico

7 Aug 17

The World Bank has issued Mexico with catastrophe bonds worth $360m to protect in against financial losses from earthquakes and tropical cyclones.

It said Mexico was among the countries most vulnerable to natural disasters, as nearly one-third of the population lives in areas exposed to hurricanes, storms, floods, earthquakes and volcanic eruptions.

This is the equivalent of 71% of GDP being at risk from two or more of these hazards.

Payouts will be triggered when an earthquake or tropical cyclone meets the criteria set for location and severity.

The bonds were issued under the World Bank’s capital at risk programme, which is designed to transfer risks related to natural disasters or pandemics from developing countries to the capital markets.

World Bank vice president and treasurer Arunma Oteh said: “The World Bank bonds we have launched are not only a financial innovation but also a milestone in our partnership with Mexico, and in our joint pursuit of preventing the human and financial tolls of earthquakes and floods. 

“We are leveraging Mexico’s leadership in developing risk insurance mechanisms against natural disasters, and the World Bank’s innovative use of private sector instruments to transfer risk to the capital markets, so that together we can deliver innovative financial solutions that help eradicate poverty and boost shared prosperity.”

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