DEAL: Pacific Alliance’s first earthquake bond

Author: John Crabb | Published: 29 Mar 2018

The World Bank has issued $1.36 billion of sustainable development catastrophe bonds that will function as insurance in the event of an earthquake for the four Latin American countries in the Pacific Alliance.

For Chile, Colombia and Peru this is the first such issuance but Mexico received a $150 million pay out following the 8.1 magnitude earthquake in Chiapas in September 2017.

According the World Bank, it is also the largest sovereign risk insurance transaction, and the second largest catastrophe (CAT) bond issuance to date. The offering consisted of five bonds in total; two for Mexico at $100 million and $160 million, $500 million for Chile, $400 million for Colombia and $200 million for Peru.

CAT bonds are structured specifically to get protection that is funded by the market, implying that an issuance of a debt security...