Mexico to add $125m of Pacific named storm cover to World Bank cat bond

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As anticipated, the Government of Mexico has returned to secure Pacific named storm protection from another new tranche of World Bank and IBRD facilitated catastrophe bond notes, as the country looks to finalise its latest capital markets source of parametric disaster insurance protection.

mexico-flagIn recent week’s, Mexico has secured a $420 million source of protection against earthquakes and Atlantic hurricanes through its new World Bank facilitated IBRD CAR Mexico 2024 catastrophe bond transaction.

As Artemis has been reporting, due to the ongoing process of making a recovery from its previous cat bond after hurricane Otis, the Mexican government has elected to delay issuance of a Pacific hurricane tranche this time around.

Now, that additional tranche of protection is being secured, through an additional offering of $125 million of notes to provide disaster insurance protection against Pacific named storms on a parametric trigger basis.

For simplicity, we’ve added this new tranche to our extensive catastrophe bond Deal Directory under the latest entry, IBRD CAR Mexico 2024 (Pacific).

Mexico is again partnered with the World Bank and the IBRD to issue this additional tranche of catastrophe bond notes, which will be issued by the International Bank for Reconstruction and Development (IBRD) under its global debt issuance facility and Capital-At-Risk notes program.

$125 million of catastrophe-linked Capital-at-risk notes are being offered, in a single tranche designed to provide Pacific named storm protection to the Government of Mexico.

Munich Re sits in the middle, like the other tranches, acting as a front to the reinsurance market, so will enter into a retrocessional agreement with the IBRD issuer and then pass on the reinsurance protection to AGROASAMEX, which is the Mexican governments insurer, that in turn passed on the coverage directly to the Mexican governments Secretary of Treasury and Public Credit.

Mexico will benefit from parametric coverage against Pacific coast named storms and hurricanes, providing an efficient and capital markets backed source of disaster insurance directly to the government, to help them in paying relief, reconstruction and recovery costs when major catastrophes occur.

The Pacific named storm parametric trigger features a linear payout factor from 25% upwards, depending on the parameters of location and minimum central pressure, like the Atlantic tranche.

The $125 million of Pacific named storm notes will offer Mexico protection based on a parametric trigger and provides per-occurrence coverage, while that coverage will run across a four year term, to early April 2028, sources said.

The Class D notes will have an initial attachment probability of 6.26%, an initial expected loss of 4.09% and are being offered to investors with price guidance in a range from 11% to 12%, we are told.

It’s good to see Mexico quickly returning to source its Pacific named storm coverage to add to the earthquake and Atlantic named storm cover of the recent issuance.

You can read all about this IBRD CAR Mexico 2024 (Pacific) catastrophe bond and more than 1,000 other cat bond transactions in the extensive Artemis Deal Directory.

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  • April 15, 2024