PH’s World Bank CAT Bonds to Provide Insurance for Disaster-Related Losses

Deputy Treasurer of the Philippines Gisela F. Lood (fifth from left) and Singapore Exchange (SGX) Chief Executive Officer Loh Boon Chye (center) strike the ceremonial gong that marks the listing of the World Bank-Philippines (catastrophe-linked bonds) CAT Bonds in the Singapore Exchange on 25 November 2019. (Singapore PE photo)

SINGAPORE 13 December 2019 — The World Bank–Philippines catastrophe-linked bonds (CAT Bonds) was issued by the World Bank (WB) and listed at the Singapore Exchange (SGX) on 25 November 2019.

The WB-PH CAT Bonds provide financial protection of up to USD 225 million (PHP 11.4 billion) insurance for losses due to earthquakes and typhoons.

The listing of the WB-PH CAT Bond at the SGX was marked by a ceremony attended by Philippine Bureau of Treasury and World Bank officials.

The CAT Bonds are not loans, but instruments similar to insurance under the WB’s Capital-At-Risk Notes facility, which can be used to transfer natural disaster risks to capital markets under the Bond’s terms. Disbursements will be triggered by specific disasters causing pre-defined damage levels. The Philippine government will use the funds for post-disaster relief and recovery programs.

The Philippines is one of the world’s most disaster-prone countries due to its geographic circumstances. The Philippine Government allocates a large annual budget (PHP 200 billion or USD four billion in 2019) for disaster resilience-related projects, such as flood control, disaster management, and capability-building and technologies for disaster risk reduction.

“The WB-PH CAT Bond will be an important tool for the communities in the Philippines hard-hit by earthquakes or typhoons, as it would provide financing for the rebuilding of damaged infrastructure and communities,” Philippine Ambassador to Singapore Joseph Del Mar Yap said.

Deputy Treasurer of the Philippines Gisela F. Lood said, “This CAT Bond will give our Government an additional layer of financial protection against more severe disasters and complement current disaster risk financing instruments.”

Deputy Treasurer Lood also stated that the WB-PH CAT Bond is an innovative financial strategy, developed by the WB and the Philippine Bureau of Treasury, for immediate post-disaster recovery programs. It is also “a first” in four aspects: first to be sponsored by the Philippines, first to be sponsored by an Asian national government, first to be listed in the Singapore Exchange, and first to be listed in an Asian Exchange. It is also the first World Bank Bond to be listed in the Singapore Exchange.

The Bureau of Treasury began the work to develop and structure the CAT Bonds in 2012. The work resulted in the development of other disaster risk financing instruments for the Philippines, such as the Parametric Insurance Program and National Indemnity Insurance Program.

The Monetary Authority of Singapore took a crucial part by providing SGD two million (PHP 74 million) grant to defray the costs of issuing the WB-PH CAT Bond and having the Bond listed in the Singapore Exchange.

Singapore works with the World Bank to support national government issuers who are interested to incorporate Insurance-Linked Securities (ILS), like the CAT Bond, into their disaster risk reduction management and financing strategy.

The WB-PH CAT Bonds is the first insurance-linked security sovereign catastrophe bond to be listed in the Singapore Exchange. As the CAT Bonds transfers the disaster funding risks to capital markets, it diversifies the sources for disaster risk financing and allows disaster management strategies to be sustainable. END

For more information, visit https://www.singaporepe.dfa.gov.ph, https://www.philippine-embassy.org.sg or https://www.facebook.com/PHinSingapore.