08.02.201818:35:00UTC+00PACIFIC ALLIANCE: World Bank Places Bonds To Attend Earthquakes

The World Bank placed bonds for sustainable development for US$1.36 billion to provide relief to the Pacific Alliance member countries in the case of earthquakes. The Pacific Alliance is composed of Chile, Colombia, Mexico, and Peru.

With their respective bonds, Chile will receive US$ 500 million, Colombia US$ 400 million, Mexico US$ 260 million, and Peru US $ 200 million in risk coverage. The transaction had a strong demand by offering diversification to the market in the form of uncorrelated risks from four different geographical areas. More than 45 investors from around the world took part. The transaction attracted almost US$ 2.5 billion in investment orders.

That was the largest sovereign risk hedging operation and the second largest issue in the history of the so-called "catastrophe bond" market. It is also the first time that Chile, Colombia, and Peru have access to capital markets to obtain insurance against natural disasters.

The issue consists of five types of World Bank bonds: one for Chile, one for Colombia, one for Peru, and two for Mexico. Its activation is parametric and depends on data from the United States Geological Survey (USGS). The bonds of Chile, Colombia, and Peru will provide coverage for three years, and those of Mexico for two years.