We understand that the World Bank has been put on notice as the Philippines government hopes to trigger the $500 million catastrophe contingent line-of-credit it can receive through its Catastrophe-Deferred Drawdown Option arrangement, dubbed the CAT-DDO 4.The Philippines government signed up to the $500 million catastrophe contingent line-of-credit back in November, .The financing facility is designed to proivde US $500 million of capital to the Philippines government to help it manage the financial impacts of natural or man-made disasters and disease outbreaks and can be triggered, or activated, on a state of emergency declaration.The Philippines Finance Secretary, Carlos G.

Dominguez III, has now told the local media that it is the intention of the government to declare a disaster after typhoon Rai (locally known as typhoon Odette, or as typhoon 28W) smashed ashore and devastated a swathe of southern and central Philippines last week.At least 375 people are now known to have died after typhoon Rai slammed the country with winds of 120 mph and higher gusts.Widespread devastation has been reported from the regions worst affected and typhoon Rai sustained strong wind speeds as it crossed the country, exacerbating the impacts and broadening the area damaged by the typhoon.

There are fears the death toll will rise much higher as difficult to access regions are reached and the true impact of the storm becomes understood.President Duterte has now been been told by advisors and his National Disaster Risk Reduction and Management Council that a state of calamity should be declared after typhoon Rai (Odette).As a result, Finance Secretary Dominguez III told the media that, “The World Bank has been put on notice.” The Philippines can elect to draw up to the full $500 million from the catastrophe contingent line of credit (CAT DDO), but may not draw the full amount it seems.

The government is waiting for reports from all its ministries as to how much financing it is felt prudent to draw-down from this facility before requesting it from the World Bank.Of course, the Philippines has other disaster risk financing arrangements, one of which is its World Bank catastrophe bond.The World Bank issued catastrophe bond provides the Philippines with $150 million of typhoon insurance from the capital markets, through the IBRD CAR 124 Class B tranche of notes.

, it is very difficult to understand whether the cat bond is exposed to a storm, as it features a complex modelled loss trigger.We explained that, as typhoon Rai approached it did not look particularly likely to have the intensity, or travel over the regions of highest exposure, in order to meet the trigger parameters.At this stage we haven’t heard anything to change that opinion and we’re not yet aware if the government has requested a calculation process be run by the cat bond modeller AIR Worldwide.

Previously, was thought to be an applicable event, so requiring a calculation of the modelled losses to be undertaken.That typhoon did not trigger the Philippines cat bond notes and it was more intense than super typhoon Rai at landfall.As a result, it still seems likely that that Rai (Odette) wouldn’t trigger the catastrophe bond, but we’ll update you should we hear different at any stage.

For now, the Philippines looks set to benefit from the CAT DDO financing, which is really designed to be accessible before the catastrophe bond anyway.As any tropical cyclone, or earthquake, that met the cat bond trigger attachment point would certainly have been declared an official disaster beforehand, opening up the catastrophe contingent debt financing first.When it comes to disaster risk financing, this is why countries like the Philippines have developed a multi-tiered set of instruments, from parametric insurance, to reinsurance, to contingent debt and catastrophe bonds, to provide much-needed recovery and reconstruction funding when the worst happens.

You can read all about the landmark Philippines catastrophe bond, the issuance, in our comprehensive catastrophe bond that includes details on over 800 transactions.———————————————————————.All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.Our can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.