Pacific Alliance signs catastrophe bond agreement

The member countries of the Pacific Alliance signed an agreement with the World Bank to issue a MultiCat bond to cover damages caused by natural disasters
September 19 earthquake - File photo/CUARTOSCURO
15/10/2017
15:00
Leonor Flores
Washington
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The member countries of the Pacific Alliance signed an agreement with the World Bank to issue in 2018 a MultiCat bond to cover damages caused by natural disasters which will reinforce Mexico's Natural Disasters Fund (FONDEN).

The agreement was signed by Mexico's Under Secretary of the Treasury and Public Credit, Vanessa Rubio, and by the Ministers of Finance of Chile, Perú, and Colombia.

“It's the first catastrophe bond (cat) issued for more than one country; this involves several nations and may open a very interesting road to explore,” said the Vice President of the World Bank for Latin America and the Caribbean, Jorge Familiar.

He pointed out Mexico is a bit ahead in natural disaster response, given the implementation of the FONDEN, which is part of the country's strategy to manage risk.

He added the World Bank has already issued to Mexico the payout of the individual catastrophe bond ($ 150 million USD) after the September 7 earthquake which damaged several regions in Oaxaca and Chiapas.

During the execution of the agreement, Mexico established the MultiCat with the Pacific Alliance will strengthen the efforts and financial aid to deal with natural disasters, in addition to the FONDEN and the local catastrophe bonds.

Each country is reviewing the coverage parameters, so the bond can be activated differently, allowing investors to diversify risks.

Last August, the Pacific Alliance stated they had already begun to analyze the possibility of a MultiCat platform covering the natural disasters all the member countries of the Alliance are prone to.

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