Is Mexico ready for its next big storm or earthquake?

 ESCRITO POR GLORIA M. GRANDOLINI EN DOM, 2012-11-04 13:50

http://blogs.worldbank.org/latinamerica/node/687

Just this past month Mexico issued a brand new catastrophe bond, building on the success of its 2009 issuance. The MultiCat Mexico 2012, is a US$315 million instrument providing coverage against earthquakes and hurricanes. The beauty of these bonds is that they allow governments to get funds and protection from financial markets rather than drawing from public coffers.
So, for all intents and purposes Mexico is securing funding for disaster relief from external sources even before any event has taken place.
As its 2009 predecessor, the 2012 Multicat provides insurance coverage against earthquake risk in five geographic regions and hurricane risk in three regions along the Atlantic and Pacific coasts.
Let me also say that Mexico is building a strong reputation in the catastrophe bond market. On this particular transaction they got much better terms than in 2009 and, overall, it was highly competitive in comparison with traditional reinsurance. Obviously this was also because there is a growing catastrophe bond market, and investor appetite to diversify from the main risks covered by other catastrophe bonds (US wind and earthquake risk). But there’s no denying Mexico is an increasingly attractive proposition within these very competitive markets.