The government was awarded a $52.5 million payout for losses the country suffered due to Typhoon Odette, the Department of Finance (DOF) announced on Tuesday, Jan. 25.
In a statement, the DOF said the Philippine government’s insurance-linked security (ILS), otherwise known as the catastrophe-linked (CAT) bond, has resulted in a partial trigger for Typhoon Odette.
“Following the onslaught of Typhoon 'Odette' (International name RAI), the Bureau of the Treasury (BTr) requested an event calculation of the country’s first and only CAT Bond,” the DOF said.
“The results of the event calculation for the wind parameters reached the partial trigger for the bond, thus resulting in a $52.5 million payout for the government,” the department disclosed.
Issued in November 2019, CAT bond is a catastrophe-linked instrument that provides the Philippines with financial protection for losses from earthquakes and tropical cyclones for three years.
This instrument was structured to provide protection for up to $75 million for earthquakes and $150 million for typhoons from November 2019 to November 2022.
The CAT Bond was issued through the World Bank’s Capital-at-Risk Notes facility with which the Washington-based lender served as issuer.
DOF Secretary Carlos G. Dominguez III said the government’s successful CAT bond issuance in 2019 has now yielded tangible results that benefited communities most vulnerable to the devastating effects of climate change.
“This financial instrument is just among the several innovative strategies that the government is undertaking to improve our resilience against natural calamities,” Dominguez said.
“We will continue to tap the international financial markets and create innovative structures and projects to achieve our goal of being a world leader in the fight against the climate crisis,” he added.
With the payout, the government has an outstanding $97.5 million coverage for typhoons and $75 million for earthquakes until November this year.
“A second calculation would be done for the Bond once precipitation data becomes available in the coming months,” the DOF said.