MANILA -- The World Bank said Monday it issued two tranches of catastrophe-linked bonds, the first of its kind in Asia, that will help provide $225 million (P11.4 billion) in insurance cover for the Philippines for 3 years.
The bonds, issued by the International Bank for Reconstruction and Development, will cover up to $75 million in losses from earthquakes and up to $150 million from tropical cyclones, the Washington-based lender said in a statement.
The IBRD's "capital risk" bond program "transfers risks related to natural disasters and other risks from developing countries to the capital markets."
The CAT Bond is designed to provide the Philippines with immediate liquidity, supporting rapid response and recovery following severe typhoon and earthquake events. It is not meant to cover total damage and losses but to provide immediate liquidity until additional resources become available, the World Bank said.
"The World Bank CAT bond is a vital building block to our long-term disaster risk and insurance strategy, which we have been steadily establishing since the aftermath of Typhoon Ketsana and Parma in 2009," said National Treasurer of the Philippines Rosalia de Leon.
De Leon was referring to typhoons known locally as Ondoy and Pepeng, which brought massive flooding to large parts of the country, including Metro Manila.
"This once again demonstrates the Philippines’ capability to develop innovative financial solutions to mitigate impacts of extreme climate and weather-related events as well as major earthquakes," said Mara K. Warwick, World Bank Country Director for Brunei, Malaysia, Philippines and Thailand.
The World Bank said it had extended the same CAT bonds to Latin American countries Columbia, Chile, Mexico and Peru.