- 2079-7117 (en ligne)
Catastrophe Financing for Governments
Learning from the 2009-2012 MultiCat Program in Mexico
- Erwann Michel-Kerjan1, Ivan Zelenko2, Victor Cardenas, Daniel Turgel3
- Author Affiliations
- 1: Wharton School, University of Pennsylvania, United States
- 2: World Bank, United States
- 3: Arch Re Facultative, United States
- 01 mai 2011
- Bibliographic information
We propose a framework to help those leaders in governments around the world and their advisors think more clearly about these issues, focusing specifically on the role that risk transfer mechanisms alternative to traditional insurance can play. The paper provides a case study of the $290 million multi-peril, multi-tranche catastrophe bond recently sponsored by the Government of Mexico and arranged by the World Bank under the MultiCat Program. We discuss the step-bystep creation of this catastrophe bond, from starting discussions that took place in 2008 to the investor road show and the successful issuance of the bond in October 2009.
This joint initiative could provide an example for other countries that wish to establish their own financial coverage solution against disasters, as part of a broader national risk management strategy. We illustrate this with the case of the government of Chile and earthquake risks. It also shows that considering countries, or even cities, for the issuance of such insurancelinked securities (ILS) could considerably expand this market for alternative catastrophe risk transfer instruments.
- MultiCat Program, catastrophe economics, risk financing, leadership in government, ART, Mexico, Sovereign Catastrophe Bonds