World Bank partners with government to set up catastrophe fund

Thursday, May 09, 2019

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THE World Bank has partnered with the Government to develop a catastrophe bond for Jamaica.

This instrument is designed to generate additional funding to better enable the Administration to effectively respond to damage and dislocation resulting from weather-related disasters.

It is one of five components of the layered multifaceted approach, which Finance and Public Service Minister Nigel Clarke says is being pursued by the Government, four of which have already been executed.

He was speaking at the opening of the two-day Jamaica Stock Exchange (JSE) disaster risk financing seminar on Tuesday at the Jamaica Pegasus hotel in New Kingston, under the theme 'Developing the Elements of Disaster Risk Financing'.

Dr Clarke, who explained that the bond is an investable capital market instrument, said the World Bank has provided the Government with the expertise to undertake its development.

He said it is intended to provide the Government with access to the resources that may be needed, in return for annual premium payments.

The minister pointed out that once the bond's development has been completed, the Administration will move to price and place the instrument to attract investors.

Meanwhile, Dr Clarke said the Inter-American Development Bank (IDB) has provided the Government with access to a pre-approved credit facility in the sum of nearly US$300 million (approximately $40 billion).

He explained that, in the event of a disaster, Jamaica will have immediate access to the funds, for which “there is no underwriting, no application [and] there is no due diligence”.

In the meantime, Dr Clarke reiterated that steps are being taken to boost the Contingencies Fund, the limit for which has been increased from $100 million to $10 billion.

Of this sum, $2 billion was transferred from government budgetary resources in the final weeks before the 2018/19 fiscal year's conclusion in March.

“That is a down payment on fiscal savings that we hope to build, over time, and that we can draw down on,” he said.

The other components of the programme, Dr. Clarke said, are the Caribbean Catastrophe Reinsurance Fund and annual programmed fiscal year budgetary allocations.

“So, the strategy that we are pursuing is… to put ourselves in a position that, in the event of a disaster, we can draw on available resources without having to divert programmed expenditure,” he added.

The conference, which concludes today (May 8), is being held to facilitate stakeholder discussions on an integrated approach to securing business continuity in the event of disasters.


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