The Asian Development Bank (ADB) is in the market to issue its first catastrophe bonds with two offerings totalling $150 million of notes, that are designed to provide $75 million of multi-year parametric earthquake and extreme precipitation disaster risk transfer to each of the Kyrgyz Republic and Tajikistan, Artemis can report.
This article is just an initial summary of the offering, given the Easter break over the coming days. We will bring you more details after the holiday weekend.
We exclusively reported back in February that the Asian Development Bank (ADB) was planning to issue its first catastrophe bond, with a parametric deal expected to be around $120 million – $150 million in size that would be designed to protect both the Kyrgyz Republic and Tajikistan against earthquake and flood risks over a three-year term.
Now, two separate cat bond issuances are being offered to investors, each $75 million in size, with one issuance planned for each of the two central Asian countries, sources have told Artemis.
It makes sense to separate the two into separate issuances, rather than attempting to bring the exposure under a single series of notes.
The catastrophe bonds for the Kyrgyz Republic and Tajikistan are being issued using the ADB’s Global Medium-Term Note Program, as Capital at Risk notes, we are told.
The Kyrgyz Republic and Tajikistan cat bonds are very similar in terms of the risk transfer they will provide and their structure, with both seeking $75 million of risk capital to protect each country against earthquake and extreme precipitation events over a roughly three-year term.
The $75 million is sub-limited in each case, with $65 million of the coverage set to provide disaster risk transfer for earthquake events and $10 million for extreme precipitation events.
The events are both covered on a parametric trigger basis, while the risk transfer protection will be per-occurrence in nature.
Both of the cat bonds have been structured by global reinsurance firm Munich Re, acting as the sole structuring agent, while Aon Securities, the specialist insurance-linked securities and investment banking arm of broker Aon will be the sole bookrunner for each of the ADB cat bonds being issued.
As said, we will bring you more details next week including further details on the structure, modelling used, parametric triggers, risk metrics and price guidance, but wanted to alert our readers today about this notable emergence of the first catastrophe bonds from the Asian Development Bank.
These cat bonds will be a good test of investor appetite for central Asian natural catastrophe risks (which are entirely new to many insurance-linked securities funds and investors), while also serving as a proof-point for the ADB, as a successful issuance will demonstrate a mode of risk transfer it could deploy and a source of risk capacity it could tap for other Asian member nations in future.
We’ve listed these first Asian Development Bank catastrophe bonds as Asian Development Bank – Kyrgyz Republic 2026 and Asian Development Bank – Tajikistan 2026 within our extensive cat bond Deal Directory.
