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IBRD taps cat bonds for Mexico, builds on pandemic deal success

The IBRD's latest foray into capital-at-risk notes brings a familiar name back to the cat bond market.

Mexico has brought its fourth catastrophe bond to the market in a deal that saw the International Bank for Reconstruction and Development (IBRD) tap its capital-at-risk programme for just the third time since its creation in 2014 – and only weeks after a ground-breaking pandemic bond transaction.

The World Bank created the IBRD’s capital-at-risk programme as a way for it to shift developing market natural disaster risks to the capital markets. Its first transaction, in 2014, was a $30 million bond linked to earthquake and storm risk in the Caribbean. The recent pandemic bond was the second capital-at-risk notes deal.

Now the Bank has added to its tally of insurance-linked issuance by wrapping up in early August a $360 million catastrophe bond designed to provide emergency help in the event of natural disasters in Mexico. The deal brings the total raised in catastrophe risk trades by the Bank – either as arranger or through an intermediation role through bonds or swaps – to $2.5 billion, with about $1 billion of that coming in just the last two months.

Mexico is well known to cat bond investors. It was the first sovereign to tap that market, back in 2006, through a $160 million earthquake deal from Cat-Mex, an SPV, with payments to Swiss Re.

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