Success of PH’s first ‘catastrophe’ bonds mirrored investor confidence—Dominguez

The Philippines’ successful issuance of catastrophe-linked (CAT) bonds mirrored foreign investors’ confidence not only in the country’s economy but also in its disaster-resiliency goals, Finance Secretary Carlos G. Dominguez III said.

The head of the Duterte economic team said the success of the CAT bond float “is one more proof of the strong investor support of the international business community for the Philippines.”

Dominguez, quoted by the Bureau of Treasury, attributed this confidence to the Duterte administration’s “sweeping reforms.”

On Monday, Nov. 25, the Philippines completed the issuance of $225 million in CAT bonds and listed these securities in the Singapore Stock Exchange (SGX).

The three-year CAT bonds were issued in two tranches—$150 million covering losses from tropical cyclones and $75 million in protection for losses from earthquakes.

The bonds were settled last Nov. 22, and will mature on Dec. 2, 2022.

The Treasury said the bond float “was met with strong investor interest” because “it will serve as a diversifier to the current pool of CAT bonds in the market.”

“This high level of investor confidence underlines not only the attractiveness” of the Philippine CAT bonds “but also these investors’ full backing for the disaster resilience agenda” of the Philippine government, said Dominguez.

He said the first ever issuance of this type of bonds by the Philippines was “just one of the many innovative structures and projects” of the Philippine government aimed at improving resilience against natural calamities.

The Philippines, he said, “is among the world’s economies most vulnerable to climate change.”

According to the Treasury, the issuance marked several firsts as it was the Philippines’ first CAT bond, and the first in Asia; the first CAT bond listed in SGX, and the first listed in any Asian stock exchange; as well as the first World Bank-issued CAT bond listed in SGX.

“This instrument was years in the making” said National Treasurer Rosalia V. de Leon.

De Leon said she was grateful to the World Bank and SGX for the successful bond float.

Revenue generated by the CATS bonds, she added, will help the Philippines cope with disasters.

“With our exposure to natural disasters, we cannot just sit idly by and do nothing,” De Leon said.

“This instrument is a way for us to proactively protect the fiscal health of our government against natural disasters,” she added.

During the CAT bonds listing in SGX last Monday, World Bank country director for Brunei, Malaysia, the Philippines and Thailand Mara K. Warwick noted that “across its 7,641 islands, the country is exposed to multiple hazards including typhoons, earthquakes, flooding, storm surges, tsunamis, volcanic eruptions and landslides” while 74 percent of Filipinos were “vulnerable to these natural hazards.”

“Poor families suffer the most from these calamities,” Warwick said.

“They are less able to secure their resources and homes, and therefore lose more when disasters strike,” Warwick said.

“Supporting disaster risk resilience and climate change adaption in the Philippines is a critical part of our work in the country,” said the WB official.

The CAT bond, he said, “complements a suite of diverse financial instruments and programs for enhancing resilience” in the Philippines.

Warwick said it would also allow the Philippines to “transfer natural disaster risks to the capital markets.”

CAT bonds, he said, “gives the Philippine government faster access to post-disaster funds that can support the life-saving work of emergency response and recovery.”

“The CAT bond demonstrates once again, the Philippines’ remarkable capability to develop innovative financial solutions to mitigate for the impacts of extreme climate and weather-related events as well as major earthquakes,” according to Warwick.