Investors in Jamaica’s catastrophe bond now face a 100% payout after Hurricane Melissa set off a full trigger event, according to the World Bank.
Jamaica’s $150 million cat bond, which was arranged by the World Bank, is designed to provide funds to pay for only the most extreme weather events and is in addition to other layers of insurance the island has arranged. The last time a weather-related cat bond paid out in full was in connection with Hurricane Ian in 2022, when several bonds suffered a 100% loss in principal, according to Artemis, a data provider specialized in insurance-linked securities.
“The payout underscores the role of catastrophe bonds in effective risk management strategies and their efficiency in transferring disaster risks to capital markets,”Jorge Familiar,World Bank vice president and treasurer,said in a statement on Friday.
Read more: Jamaica Catastrophe Bond Has Now Triggered, Government Says
Jamaica, which the World Bank estimates is the third most-exposed country to natural catastrophes, is also set to get coverage in the form of pre-arranged credits and parametric insurance. Its cat bond sits at the top of the insurance tower.
Hurricane Melissa became the most powerful storm on record to strike Jamaica in part because of water made hotter and air made wetter by global warming. The storm was also one of the strongest ever to form in the Atlantic, with winds reaching 185 mph shortly before making landfall in Jamaica. Those extreme wind speeds were five times more likely and 7% more intense because of climate change, according an analysis by World Weather Attribution.
Read More: Here’s How Much Hurricane Melissa Was Worsened by Climate Change
Cat bonds allow issuers — often insurers but sometimes also whole countries — to pass part of their risk over to capital markets. Sales of the instruments have soared amid increasing risk from property exposure, inflation and climate change. Investors can face potentially large losses if a bond is triggered and can generate significant returns if a predefined catastrophe doesn’t occur.
Jamaica narrowly missed getting any coverage from its cat bond last year when Hurricane Beryl hit, after it was judged that the air pressure required for a payout wasn’t reached. That’s despite the fact that Jamaica’s prime minister had declared the island a disaster area.
A calculation done by a third-party agent, AIR Worldwide Corporation, concluded that Hurricane Melissa reached pre-agreed parametric triggers which qualified the bond for a full redemption, according to the World Bank. The analysis was based on the storm’s central pressure and path, as reported by the US National Hurricane Center.
Moody’s RMS Event Response estimates that Jamaica’s total insured losses from Hurricane Melissa will likely range between $3 billion and $5 billion.
“Hurricane Melissa was truly a generational event for Jamaica and will be the storm that defined the 2025 North Atlantic hurricane season,” Jeff Waters, director of North Atlantic Hurricane models for Moody’s, said in a statement.
“Repairs and recovery will inevitably go through significant supply chain challenges, even as several key ports on the island remain operational,” he said. “for these reasons, we expect recovery efforts to take several months, if not years.”
Photograph: The destroyed neighborhood of North Street following the passage of Hurricane Melissa in Black River, Jamaica on Oct. 29, 2025. Photo credit: Ricardo Makyn/AFP/Getty Images
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