"Fayval Williams is the minister of finance of Jamaica, a place where the threat of natural disaster is always on people's minds. FAYVAL WILLIAMS: We are in the belt - the hurricane belt. There isn't much we can do to change that. GUO: But what the government can do is to make sure that there's money available to help people rebuild. So a few years ago, Jamaica turned to this unusual financial idea."
"It's called a catastrophe bond, and it's like a way of betting on natural disasters. With the help of the World Bank, Jamaica went around to international investors saying, hey, we bet a pretty big hurricane will hit Jamaica in the next couple of years. Do you want to take the other side of that bet? So these investors put up a bunch of money, and the deal is, if there's no hurricane, they get their investment back plus interest."
Catastrophe bonds let governments pre-finance disaster relief by selling risk to investors who receive periodic interest payments. Investors lose principal if predefined triggers, such as major hurricanes, occur; otherwise they receive principal back with interest. Jamaica purchased a catastrophe bond through the World Bank and paid about $10 million a year in interest for coverage. After Hurricane Melissa, the bond triggered and delivered a $150 million payout to Jamaica for rebuilding. Catastrophe bonds provide immediate liquidity after disasters, reduce reliance on ad-hoc aid, and have grown more popular as climate change increases extreme-event risk.
Read at www.npr.org
Unable to calculate read time
Collection
[
|
...
]