What it's about:
The World Bank will issue $360 million in three-year catastrophe bonds on behalf of Mexico, to be paid out in the event of hurricanes or earthquakes that devastate the country.
The bonds are part of the World Bank's "capital-at-risk notes" programme, created in 2014, by which the bank aims to transfer risks related to natural disasters from developing countries to capital markets.
If a natural disaster occurs in Mexico, some or all of the bond proceeds will be made available to the Mexican Fund for Natural Disasters, provided it meets criteria set forth by the U.S. Geological Society or U.S. National Hurricane Center.
The bonds are divided into three insurance categories: hurricanes from the Atlantic Ocean, hurricanes from the Pacific Ocean and earthquakes with payout categories ranging from 25 percent to 100 percent.
Why it's noteworthy:
This will be the largest Mexican catastrophe bond issuance to date, following a $290 million issue in 2009 and $315 million issue in 2012.
The World Bank also issued a "pandemic bond" earlier this year to support immediate emergency financing facilities in the event of a major global health pandemic, such as the 2014 Ebola outbreak.
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