The government of Portugal is considering catastrophe bonds as a potential mechanism that could be utilised to provide risk capital for disaster resilience and to better manage catastrophe risk exposure in the country.
Insurance features as a key component of the plan, with measures ranging from multi-risk agricultural coverage, to mandatory catastrophe insurance for properties and homes, and even a catastrophe fund for natural disasters and seismic events to ensure universal access to coverage.
Explaining the new multi-year program, the Portuguese government said, “The PTRR is the plan to rebuild and recover the losses caused by the storms of the start of, to prepare the country to face climate events and other extreme risks, and to improve emergency response capabilities and support for the community at these moments.
“It is a plan of reforms and investments that organizes the reaction and structural transformation for a country that is more resilient taking account of the lessons learned from the recent extreme event (storms, wildland fires, blackout, droughts, cyberattacks, earthquakes). The PTRR envisages actions from the pubic – state, regions, and municipalities, and the private and social sectors, to be executed within a 9-year horizon, split into the short, medium, and long term. This plan allocates an overall sum of 22.6 billion euros, between national public funding, (37%), private funding (34%), and European funds (19%).”
Just in 2026 so far, Portugal has been impacted by significant economic losses from severe weather and storms, with estimates suggesting a total cost of more than EUR 5 billion. In addition, the country has experienced damaging wildfires in recent years as well that have driven large economic impacts.
Broker Aon estimated that Windstorm Kristin in the first-quarter may have been the costliest insured loss event in Portugal’s history, with an estimated EUR 0.9 billion ($1 billion) of insured losses.
Portugal wants to encourage greater uptake of insurance to protect against weather, climate and natural disasters, as well as more financing to make the economy resilient to other shocks, such as power outages and cyber attacks.
Interestingly, the government has proposed that it could issue its own catastrophe bonds, as one way to provide additional risk capacity to support resilience and recovery from major events.
“The issuance of catastrophe bonds by the Treasury and Public Debt Management Agency (IGCP) could be considered as a tool for managing catastrophe risk. These instruments ensure immediate access to financing in the event of extreme events, promoting cost-sharing with investors and spreading the budgetary burden over time, thus contributing to the diversification of funding sources and strengthening the State’s financial resilience to high-impact risks,” the government explained.
That would be a unique approach, as never before has a government issued its own catastrophe bonds through its treasury facilities.
Of course, we’ve seen governments and countries covered by sovereign catastrophe bonds before, with the assistance of multi-national players like the World Bank and more recently Asian Development Bank.
But for a government to use its own securities issuance facilities to issue catastrophe bonds would be a new first for the market.
As we’ve said before, there is no reason this can’t be achieved, likely with some support from either reinsurance players or a multi-national entity to facilitate a transaction.
Portugal, if it went ahead with this cat bond plan, could set an example for how countries can take greater responsibility for protecting the economy and their people, using the capital markets as a source of peak natural catastrophe and disaster risk transfer capacity.
Portugal, as a country, has been covered under catastrophe bonds before, largely in European windstorm deals that provide reinsurance for European or global re/insurers.
In addition, the MedQuake catastrophe bond sponsored by Swiss Re back in 2007 provided the reinsurer with protection against earthquake losses in Portugal, alongside other European countries.
