Jamaica’s catastrophe bond has now been triggered following the impact of Hurricane Melissa, the government confirmed.
“Over the next few weeks, we will receive further details on the payout,” said Dana Morris Dixon, Minister of Education, Skills, Youth and Information, during a briefing from the Prime Minister’s office on Friday.
The $150 million catastrophe bond, arranged by the World Bank, is designed as a last-resort financial backstop to cover only the most extreme weather events. According to Artemis, a data provider specialising in insurance-linked securities, the last time a weather-related cat bond fully paid out was for Hurricane Ian in 2022, when several bonds suffered a total loss of principal.
The damage caused by Hurricane Melissa in Jamaica is expected to cost insurers between $1 billion and $3 billion, according to property intelligence firm Cotality. Insured losses represent only a portion of the total property damage, which some estimates suggest may reach $7.7 billion for the island alone.
“What is important to note is that we are not dependent on the insurance payouts,” Morris Dixon stated. She added, however, that the funds available “will never be enough to carry out restoration work or even immediate relief efforts right now.”
The structure of Jamaica’s cat bond, combined with the intensity of Hurricane Melissa, has enabled what David Panton, chairman of Atlanta-based Panton Equity Partners and former Jamaican senator, described as “the largest and fastest disaster relief payout in the country’s history.” In an emailed comment to Bloomberg, he said: “Funds will flow in weeks, not months, providing the government with critical capital for lifesaving relief, infrastructure repair, and future resilience.”
Jamaica, which the World Bank estimates to be the third most-exposed country globally to natural catastrophes, has developed multiple layers of disaster-risk financing, including pre-arranged credit facilities and parametric insurance. Its catastrophe bond sits at the top of this insurance framework, providing 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 noted in a report dated 29 October. “Hurricane Melissa is expected to trigger a sharp, though temporary, contraction in Jamaica’s real GDP, driven by disruptions in tourism, agriculture, and infrastructure.”