Jamaica Catastrophe Bondholders Headed for ‘Full’ Trigger Event

Investors in Jamaica’s catastrophe bond now face a potential full payout scenario, meaning the entire value of the bond will likely go toward covering the cost of Hurricane Melissa.That’s according to Florian Steiger, chief executive of Icosa Investments AG, a Swiss investment firm specializing in alternative fixed-income strategies.

“We expect the cat bond to pay out in full or at least close to it,” he told Bloomberg on Tuesday.

Jamaica’s $150 million cat bond, which was arranged by the World Bank, is designed as the ultimate backstop to help provide funds to pay for only the most extreme weather events.

A full payout will “hopefully bring some fast relief funds to the most affected communities,” Steiger said.

A spokesperson for the World Bank said it is closely monitoring Hurricane Melissa’s location and severity. Jamaica’s catastrophe bond includes parametric triggers based on storm characteristics such as central pressure and path, and the World Bank will provide updates as they become available, the person said.

Melissa’s top winds reached 185 miles (298 kilometers) per hour, up from 180 mph earlier Tuesday. It’s a Category 5 storm, the highest level on the five-step Saffir-Simpson scale.

Melissa’s compact size and western landfall in Jamaica means losses will likely fall short of early estimates that went as high as $16 billion, said Chuck Watson, a disaster modeler with Enki Research. He now estimates losses will reach $6.5 billion, comparable to the impact of Hurricane Gilbert in 1988.

Melissa ranks among “the most intense Atlantic hurricanes ever observed. Jamaica faces extreme impacts in the next few hours,” Icosa said in a LinkedIn post on Tuesday. “The human toll and physical damage will be severe, with recovery efforts requiring significant international support over the coming months and years.”

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