A cat bond for the Pacific Alliance?

Tuesday, November 29, 2016

Peru, Chile, Colombia and Mexico – members of the Pacific Alliance – are interested in developing a catastrophe bond for providing coverage against damage caused by earthquakes, according to Swiss Re.

"We intended to group these countries... in order to diversify risks throughout the region, so each country pays a small premium," Juan Pablo Regidor, senior client manager at Swiss Re was quoted as saying by Lima daily Gestión.

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Mexico already has this kind of coverage against hurricanes and earthquakes. If the country is hit by a category 5 hurricane, with atmospheric pressure of 920 millibars or less, or by a 7.1 earthquake, then a US$300mn cat bond insurance is activated.

"Last year the Mexican government received US$50mn in compensation for Hurricane Patricia," added Regidor.