Finance minister says he will soon provide details on proposed catastrophe bond


Finance minister says he will soon provide details on proposed catastrophe bond

Sunday, February 16, 2020

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Minister of Finance and the Public Service Dr Nigel Clarke says he will provide further details about the proposed catastrophe bond being developed for Jamaica in his budget presentation next month.

Dr Clarke made the disclosure while addressing the opening ceremony for the two-day European Investment Bank (EIB) Caribbean Roadshow  2020 symposium at AC Marriot Hotel in New Kingston last Wednesday (February 12).

The catastrophe bond is an investment instrument designed to generate funding to better enable the Administration to adequately prepare for and respond to climate-and weather-related events. Under such a bond, the Government will make premium payments against a principal sum.

The finance minister said the World Bank, which has been providing technical support for the instrument's development and modelling, has provided a “significant” grant, through the Global Risk Financing Facility (GRiF), towards the initial premium payment. He also indicated that the United States Agency for International Development (USAID) had made a similar commitment.

“The understanding is that, on the [instrument's] renewal, Jamaica will, by then, have more fiscal space that we can continue to pay those premiums going forward,” he noted.

The minister said the catastrophe bond adds to measures being taken by the Government to strengthen financial protection against natural disasters.

Other measures include annual budgetary resources; the catastrophe fund, which was raised from $100 million to $10 billion and to which the Government made an initial $2-billion deposit during the 2019-20 fiscal year; and a $40-billion Inter-American Development Bank (IDB) credit contingency claim product with drawdown “within days of a natural disaster event”.

Dr Clarke said studies show that climate-and weather-related events in Jamaica have customarily cost the country two per cent of gross domestic product “on a routine basis”.

He noted, however, that every several years, the country is “hit with something that's outside of that [two per cent] range”.

“For that reason, we do not have the option of ignoring these realities,” he said, adding that “we have to make the kind of changes that we need to, to confront these realities”.

“We are working hard to ensure that we pursue the adaptation that is required; but even as hard as we are working, there is much more to be done,” the minister said.

The EIB's Caribbean Roadshow symposium was intended to foster knowledge transfer around trends and innovations affecting the financial industry, facilitate the exchange of strategic experiences, and encourage collaboration among regional stakeholders, experts and EIB representatives.

The event, under the theme “Climate Finance: challenges and opportunities for the caribbean financial Sector,” was co-hosted by the EIB and Frankfurt School of Finance and Management, in Germany.

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