World Bank issues $175Million cat bond to boost Mexico's hurricane protection

Issued under the World Bank’s “capital at risk” notes program, the cat bond attracted 22 institutional investors worldwide.

The World Bank has announced the issuance of a new catastrophe (cat) bond worth $175 million, providing additional insurance protection for the Government of Mexico against named storm events on the Pacific side of the country. This bond represents a significant expansion of Mexico’s coverage for Pacific hurricane risk compared to the recently expired $125 million cat bond, bringing the nation’s overall insurance coverage supported by the cat bond market in 2024 to $595 million.

Issued under the World Bank’s “capital at risk” notes program, the cat bond attracted 22 institutional investors worldwide. It offers financial protection to Mexico for four years, with payouts triggered if a named storm along the Pacific coast meets specific criteria for location and severity outlined in the bond terms. Insurance payouts, funded by principal reductions of the bonds, will be facilitated by IBRD and intermediaries Munich Re and Agroasemex, S.A., a Mexican state-owned insurance company.

Jorge Familiar, Vice President and Treasurer of the World Bank, highlighted the significance of the bond issuance in strengthening Mexico’s financial protection against natural disasters. He emphasized the innovative approach of leveraging the capital markets for the benefit of member countries.

Héctor Santana Suárez, Head of Insurance, Pensions, and Social Security in the Ministry of Finance of México, commended the Government of Mexico's commitment to financial preparedness for natural disasters. He underscored the role of cat bonds in increasing Mexico’s resilience against future events and noted their alignment with the federal strategy for Financial Protection of Disaster Risks.

Mark Roland Thomas, World Bank Country Director for Mexico, praised Mexico's use of innovative financial tools like cat bonds for disaster risk management, setting a standard in the field.

The joint structuring agents for the bond issuance were GC Securities, Aon, and Munich Re. GC Securities and Aon served as joint bookrunners for the transaction, with AIR Worldwide acting as the risk modeler and calculation agent.

Paul Schultz, CEO of Aon Securities, highlighted the importance of the bond issuance in Mexico’s risk management strategy for natural disasters and its contribution to sustainable development projects financed by the World Bank.

Cory Anger, Managing Director of GC Securities, emphasized the partnership of insurance-linked securities (ILS) investors in supporting regions affected by natural disasters, showcasing the sustainable impact of the transaction.

Andreas Müller, Head of Global Retro and ILS at Munich Re, expressed satisfaction with the successful completion of the transaction, praising the collaborative effort of all parties involved.