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The catastrophe bond that Jamaica floated recently on the international market won’t help it in its disaster-recovery efforts.
Although the bond was designed to provide financial protection for the issuer in the event of a Category 5 or very intense Category 4 storm, such as Beryl, a key trigger did not materialise.
While Beryl was categorised as making a hit on Jamaica, the hurricane did not make landfall, which, Minister of Finance Nigel Clarke disclosed on Friday, is required to trigger the cat bond.
For some its impact was devastating; for others, there was minimal disruption.
“Had Hurricane Beryl made landfall in Jamaica or had Hurricane Beryl retained its intensity as observed on Tuesday (as measured by centralised air pressure), it would have certainly triggered the catastrophe bond,” he said.
Still, Clarke noted that the country has other options.
Jamaica will draw on its Contingency Fund and Natural Disaster Fund, totalling $4.5 billion, as the first call on financing to fund recovery efforts from Hurricane Beryl. But how much more it might need to restore infrastructure and cover other expenses is still unknown.
The scope of the damage and the funds required to recover from Beryl were still being assessed in the lead-up to the weekend.
“Though there was significant damage in sections of the island, in many other parts, including much of Kingston, the ackees and mangoes remain on the trees,” Clarke said in a statement on Friday.
Jamaica is insured by the CCRIF SPC, which provides coverage for countries in the Caribbean and parts of Central America hit by natural disasters, however, the damage has to hit a particular threshold to trigger a payout.
Up to late Friday, there was no indication whether Jamaica had hit the trigger.
“We have a tropical cyclone and excess rainfall policies with the Caribbean catastrophe reinsurance facility. We will know by end of business on Friday on possible payouts from the tropical cyclone policy, but we have to wait until early next week to receive feedback regarding the excess rainfall policy,” the finance minister said at mid-afternoon.
Still, Clarke also indicated that the country may have access to others funds were Jamaica to place a ‘Contingent Credit Claim’ before the Inter-American Development Bank.
Those funds amount to as much as $46 billion. but “it will take a few days to ascertain exactly how much of this Beryl will trigger as well as how much we will need”, the minister said.
Additionally, the Government of Jamaica has a $140 billion precautionary and liquidity line with the International Monetary Fund (IMF) were the country to find itself in a cash crunch. But Clarke doesn’t anticipate such a scenario emerging.
“At the current time, therefore, this facility is, therefore, unlikely to be drawn,” he said of the precautionary funds.
“Over the next few days, the GOJ will aggregate the estimates of damage and interventions required and finalise the total resources from disaster risk financing sources,” Clarke said
CCRIF, formerly known as the Caribbean Catastrophe Risk Insurance Fund prior to its expansion into Central America, made its first payout for 2024 on Tuesday, July 1, to Guatemala. The payout of US$6.37 million covered damage that resulted from six days of rainfall, from June 13 to 19.
The insurance facility said, as it made the announcement, that it was also monitoring Beryl as it made its way through the region. The system impacted various Caribbean islands including Grenada and Barbados.
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