World Bank makes first listing of US$225m catastrophe-linked bonds on SGX

THE World Bank Group's International Bank for Reconstruction and Development (IBRD) has issued two tranches of catastrophe-linked bonds totalling US$225 million.

For the next three years, the bonds will provide the Philippines with financial protection of up to US$75 million for losses from earthquakes and US$150 million against losses from tropical cyclones.

They were listed on the Singapore Exchange (SGX) on Monday at noon.

These are the first World Bank bonds ever listed in Singapore, the first catastrophe bonds listed on an Asian exchange, and the first catastrophe bonds ever sponsored by an Asian sovereign, the World Bank Group noted.

The three-year bonds will both mature on Dec 2, 2022, and pay monthly coupons.

The US$75 million earthquake bond carries a coupon which is the sum of the prevailing three-month US-dollar Libor (London interbank offered rate) plus a funding margin of 0.12 per cent per annum and a risk margin of 5.5 per cent per annum.

The US$150 million cyclone bond carries a coupon which is the sum of the prevailing three-month USD Libor plus a funding margin of 0.12 per cent per annum and a risk margin of 5.65 per cent per annum.

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

Payouts will be triggered when an earthquake or tropical cyclone meets the predefined criteria under the bond terms.

For the new bonds, GC Securities, a division of MMC Securities LLC, and Swiss Re were joint structuring agents, joint bookrunners and joint managers. Munich Re was a joint structuring agent, placement agent and joint manager. AIR Worldwide is the risk modeller and calculation agent.

The Philippines is one of the most disaster-prone countries in the world, the World Bank Group said on Monday. In 2013, Typhoon Yolanda caused the loss of 6,300 lives and an estimated US$12.9 billion in damages, or about 4.7 per cent of the country's gross domestic product.

IBRD lends to governments of middle-income and creditworthy low-income countries. It is one of five organisations under the World Bank Group.