Fostering Catastrophe Bond Markets in Asia and the Pacific / OECD.

Format:

Book

Author/Creator:

Organisation for Economic Co-operation and Development, author, issuing body.

Series:

Development dimension.

The Development Dimension

Language:

English

Subjects (All):

Bond market.

Corporations--Finance.

Corporations.

Physical Description:

1 online resource (138 pages) : illustrations.

Place of Publication:

Paris : OECD Publishing, 2024.

Summary:

As climate change increases exposure to natural disasters, countries need new solutions to mitigate risks of natural hazards. For many in Asia and the Pacific, mobilising existing resources is not enough: they need to consider a grand design of disaster risk financing strategies. Catastrophe bonds (CAT bonds) can be an effective, market-based financing tool for the region. While the global CAT bond market has grown steadily since the 1990s, it remains weakly developed in Asia and the Pacific. Its successful development there requires robust purpose-built legal frameworks; developed general bond markets, especially in local currency; appropriate capacity building; and data-driven pricing models. This report explores each of these conditions along with policy suggestions for fostering them, and discusses the development of multi-country CAT bonds in Asia and the Pacific.

Contents:

Foreword 3

Acknowledgements 4

Editorial 5

Executive summary 9

1 Overview 11

Protection gaps are a major issue 12

The CAT bond market is growing, but it remains limited in the region 13

Characteristics of catastrophe bonds 15

The use of CAT bonds provides various benefits 16

Constraints and challenges hinder CAT bond development in the region 17

Implementing policies for fostering catastrophe bond markets 17

The use of CAT bonds as a risk transfer mechanism in countries around the world 19

Sharing risks among countries 21

Notes 22

References 22

2 Catastrophe bonds in Asia and the Pacific: Recent trends and characteristics 25

Introduction 26

Characteristics of catastrophe bonds 27

CAT bond trigger mechanisms and choice of trigger 28

Recent trends in CAT bond markets 33

The development of CAT bond markets in Dynamic Asia and the Pacific 36

Conclusion 39

Notes 40

References 40

3 Benefits and challenges of developing catastrophe bond markets in Asia and the

Pacific 45

Introduction 46

Benefits of catastrophe bonds for Dynamic Asia and the Pacific 46

What hinders CAT bond development? Constraints and challenges 51

Policy directions for fostering catastrophe bond markets 56

Conclusion 66

Notes 66

References 67

Annex 3.A. Modelling approaches and challenges for catastrophe risk pricing 74

Overview of CAT bond modelling approaches 74

Challenges of existing CAT bond modelling approaches 78

4 Country case studies of catastrophe bonds 81

Introduction 82

The case of the Philippines 82

The case of Indonesia 93

The case of China 102

The case of India 103

The cases of Mexico and Jamaica 106

The cases of selected OECD countries 109

Conclusion 112

References 113

5 Sharing disaster risk among countries: Regional case studies 119

Introduction 120

Transferring regional risk to the capital markets 121

Challenges of enhancing regional co-operation 132

Conclusion 133

References 133

Tables

Figures

Boxes.

Notes:

Description based on publisher supplied metadata and other sources.

Includes bibliographical references.

ISBN:

92-64-40784-7