Catastrophe bond and insurance-linked securities (ILS) fund manager Plenum Investments has said it believes, based on the latest hurricane Beryl forecasts, that a partial payout of Jamaica’s $150 million IBRD CAR Jamaica 2024 catastrophe bond is “likely”, if there is no significant change up to its closest pass to the island.
As we’ve been reporting, the World Bank facilitated IBRD catastrophe bond for Jamaica is considered at-risk of being triggered by major hurricane Beryl.
The catastrophe bond provides Jamaica with a source of parametric disaster insurance, funded by capital market investors.
In the case of it being triggered, the responsive parametric payout would go to the Jamaican government, to help in funding the islands recovery from hurricane Beryl.
Commenting on the cat bond, Plenum Investments explained, “Jamaica has taken precautions for such an event and, among other things, purchased parametric risk cover through a CAT bond. For this parametric cover, Jamaica and parts of the surrounding sea were divided into 19 sub-areas and a minimum air pressure was assigned to each sub-area.
“The CAT bond makes payments if the central air pressure of the storm falls below the defined minimum air pressure in one or more sub-areas. The minimum payout is 30% of the nominal value and increases with increasing storm intensity and the number of affected sub-areas and can reach up to 100%.”
Adding, “Hurricane “Beryl” will weaken in the hours until it hits Jamaica and the exact path of the storm is also still subject to uncertainty.
“However, it seems very likely that under the current conditions there will be at least a partial payout of the CAT bond.”
As we had reported, offers of the Jamaica cat bond notes in the secondary cat bond market had tumbled as the forecasts worsened, with many investors seeing a partial payout as a possibility.
Plenum Investments clearly sits in this group and also noted that it is a holder of the Jamaica cat bond, with a 0.58% in its Plenum CAT Bond Dynamic Fund.
Plenum also noted that, as we had reported, the threat to Mexico’s IBRD catastrophe bond appears lower.
“According to the current forecast, after passing by Jamaica, the storm will continue on towards the Yucatan peninsula of Mexico, where it is expected to make landfall South of Cancun as a category 1 or 2 hurricane,” Plenum said.
Adding, “The Mexican government has also a parametric CAT Bond cover against hurricanes such as Beryl, however this CAT Bond is not expected to be impacted by the storm as only major hurricanes (category3 and above) will impact the bond.”
Update: The latest 12:00 UTC forecast from the NHC has shown an increase in hurricane Beryl’s central pressure since Plenum’s update was published, which might reduce the chances of a triggering event occurring.
