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Despite the devastating effects of Hurricane Beryl, Jamaica is unable to access catastrophe bond funds.
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This is because the air pressure required for a payout was not exceeded.
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The bondholders therefore did not have to make any payment.
Although Jamaica was devastated by a Category 5 hurricane, the country has been unable to access funds from a bond intended to cover natural disasters, Bloomberg reported.
This is despite the fact that Jamaica was one of the first countries to introduce so-called catastrophe bonds, assets that offer investors an attractive return if they take the risk of losing their money in a natural disaster. In light of climate change, catastrophe bonds have become a more sought-after investment.
But in this case, the investors in the country’s $150 million assets would not have to pay a cent, the media said.
Instead, bondholders were spared losses due to the special conditions of the investment instrument.
For the costs to pay off, the air pressure would have to have reached a certain minimum in one of the parts of the country during the hurricane, Bloomberg reported, citing a recommendation sent to investors by the Swiss-based Plenum InvestmentsAlthough it was a strong storm, the pressure did not meet these criteria.
The catastrophe bonds were structured to earn investors 7% more than the U.S. Treasury yield. According to the World Bank, the facility provides catastrophe insurance for four hurricane seasons and has attracted 15 global investors.
While Jamaica must bear the cost of the damage internally, the country has a disaster protection net worth $1.6 billion, according to Bloomberg. Its government bonds, meanwhile, remain intact.
Climate disasters are not always serious enough to trigger the payout of catastrophe bonds, an expert told Business Insider in October.
Although the United States was hit by more than 20 disasters last year, the Swiss Re Global Cat Bond Total Return Index achieved its highest one-year return in two decades at 19.69 percent.
Read the original article on Business Insider
