World Bank cat bond covers earthquake risks in Latin America
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Aon Securities, part of Aon Benfield Group Ltd., on Wednesday said it has structured a $1.36 billion parametric earthquake catastrophe bond for the World Bank.
The issuance was made across five tranches of notes — one each for Chile, Colombia and Peru, and two for Mexico, with Chile receiving $500 million, Colombia $400 million, Mexico $260 million and Peru $200 million in earthquake risk protection, Chicago-based Aon Securities said in a statement.
The Chile, Colombia and Peru notes provide three years of coverage and the Mexico notes two years. The bond’s parametric trigger uses U.S. Geological Survey data.
The notes bring the total amount of risk transfer facilitated by the World Bank to $3.6 billion.
The issuance “highlights the strategic partnership between nations seeking efficient sources of capital to fund emergency costs and investors seeking to invest in diversifying risks and support sustainable development initiatives,” Paul Schultz, CEO of Aon Securities, said in the statement. “We are optimistic that this transaction will pave the way for other governments to develop more resilient risk management programs for their uninsured exposures.”
The largest-ever transaction was the 2014 $1.5 billion Everglades Re Ltd. from Citizens Property Insurance Corp. (Florida Citizens), a bond providing coverage for Florida windstorms that was upsized more than once due to strong demand.
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