Jamaica’s World Bank cat bond still $150m, expected to price at upper-end

The Government of Jamaica’s new World Bank facilitated catastrophe bond issuance remains at its initial $150 million in size, while the notes issued under this IBRD CAR Jamaica 2024 cat bond are now expected to be priced at the upper-end of initial guidance, Artemis has learned.

Jamaica returned to the catastrophe bond market earlier this month, with an initial target to secure at least $150 million in parametric named storm disaster insurance protection from the capital markets through this new World Bank and International Bank for Reconstruction and Development (IBRD) facilitated and issued cat bond.

The goal is to secure hurricane insurance protection across four Atlantic wind seasons.

Jamaica had previously sponsored its first cat bond with the assistance of the World Bank in 2021, with that deal providing parametric named storm and hurricane disaster insurance protection from the capital markets across three Atlantic wind seasons.

That $185 million IBRD CAR 130 cat bond transaction for Jamaica matured at the end of 2023 and we’ve reported a number of times about the country’s appetite to renew it.

We had also previously explained that Jamaica was set to target four hurricane seasons of coverage with a renewal for its World Bank catastrophe bond.

We are now told by cat bond market sources that Jamaica’s second catastrophe bond looks unlikely to upsize, with the target remaining at $150 million, so smaller than its recently matured deal.

There is still time for that to change, but at this stage with final pricing imminent, we are told it appears unlikely.

At the same time, we’re told the notes issued are now expected to be priced with their spread, or risk margin, at the upper-end of initial guidance, perhaps a further reflection of cat bond investors enforcing minimum return requirements, especially for Atlantic hurricane risk.

So, the still $150 million tranche of catastrophe-linked notes will provide Jamaica with parametric disaster insurance protection against Atlantic named storm risks, on a per-occurrence basis over a term covering four hurricane seasons, with maturity expected on December 29th 2027.

The Jamaica cat bond notes come with an initial expected loss of 1.5% and were initially offered to investors with a risk margin (spread) price guidance in a range from 6.25% to 7%.

We’re now told that the price of the risk margin has been lifted to 7%, so fixed at the upper-end of the initial guidance range.

Update: We’re now told that the deal has indeed priced at $150m in size, with the spread finalised at 7%.

For comparison, the previous 2021 Jamaica cat bond issuance had an expected loss of 1.52% and priced with a risk margin of 4.4%.

So, the multiple-at-market of this second Jamaica catastrophe bond is set to be considerably higher than the 2021 deal, reflecting harder cat bond market pricing conditions and also investors desire to secure what they perceive to be minimum acceptable returns for the risk they assume.

You can read all about this IBRD CAR Jamaica 2024  catastrophe bond and more than 1,000 other cat bond transactions in the extensive Artemis Deal Directory.