Jamaica had enough access to funds after Beryl despite no cat bond payout: CDP's Meenan

By Henry Gale

March 7 - (The Insurer) - Jamaica's disaster risk financing (DRF) strategy provided enough access to funding after Hurricane Beryl, the Center for Disaster Protection's Conor Meenan has said, following criticism of the country's catastrophe bond.

An analysis by Meenan, CDP's lead risk finance specialist, found that Jamaica's reserve funds, parametric insurance payouts and contingent credit line were sufficient to cover Beryl's estimated cost to the government.

Jamaica's World Bank-sponsored cat bond made no payout for Hurricane Beryl because the storm's track and minimum central pressure narrowly missed the required conditions for the parametric trigger.

The Vulnerable Twenty group of countries highly exposed to climate change subsequently published a report that sharply criticised the bond, saying its structure “protects investors but leaves Jamaica vulnerable to catastrophic risk”.

Nigel Clarke, Jamaica's finance minister, had said after the hurricane that the country had a multilayered set of financial instruments for emergency response. "While it is neither expected nor designed that all storms will trigger all instruments, the idea is that we should always be able to access resources from some instruments for every storm."

According to Meenan, Jamaica had access to reserve funds, $26.9 million in parametric insurance payouts from regional risk pool CCRIF SPC and a $207 million contingent credit line from the Inter-American Development Bank after Beryl, although the country appears not to drawn down on the credit line.

This was enough to cover the estimated response costs, which were between $85 million and $200 million, he said.

"The fact that the DRF strategy provided access to enough pre-arranged funding even without the cat bond triggering … suggests that collectively, Jamaica’s DRF strategy performed well in response to Beryl," Meenan said.

Meenan also said Beryl's damage estimates did not appear high enough to warrant a cat bond payout and the public messaging from Jamaica's ministry of finance did not indicate it expected one.

"Ultimately, Jamaica made a choice to buy the cat bond to provide financing for lower likelihood, higher severity events, and at least for Beryl it has worked as it was designed," he added.