PH Cat bonds float proof of strong investor support

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    The successful float of the Philippines’ first ever insurance-linked security (ILS), more commonly known as catastrophe-linked bonds (Cat bonds), is proof of the strong investor support of the international business community for the Philippines amid the reforms being implemented by the administration to sustain the growth momentum while climate-proofing the country, the Department of Finance (DOF) said.

    Carlos Dominguez, DOF secretary, said in a statement posted in the Bureau of the Treasury’s (BTr) website yesterday this high level of investor confidence underlines not only the attractiveness of the ILS issuance but also the investors’ full backing for the disaster resilience agenda of the administration.

    “This maiden ILS float is just one of the many innovative structures and projects that the government is undertaking to improve the resilience against natural calamities of the Philippines, which is among the world’s economies most vulnerable to climate change,” Dominguez said.

    The World Bank earlier said its International Bank for Reconstruction and Development (IBRD) arm issued two tranches of Cat bonds that will allow the Philippine government to cover financial protection of up to $75 million for losses from earthquakes and $150 million against losses from tropical cyclones for three years.

    The bonds were issued under IBRD’s “capital at risk” notes program, which can be used to transfer risks related to natural disasters and other risks from developing countries to the capital markets.

    The BTr also said the issuance was met with strong investor interest for the new bonds as it will serve as a diversifier to the current pool of Cat bonds in the market.

    “This instrument was years in the making, and we are grateful to the World Bank and our structuring agents for ensuring a successful deal. We would also like to thank the Monetary Authority of Singapore (MAS) for their invaluable support of this endeavor and for the grant that they gave the Philippines to defray some of the expenses of this transaction,” Rosalia de Leon, national treasurer, said in the same statement.