Investors in Jamaica’s disaster bonds now face a 100% payout after Hurricane Melissa triggered a full trigger event, according to the World Bank.
Jamaica’s $150 million CAT bond, which was arranged by the World Bank, is designed to fund only the most extreme weather events and is in addition to the other layers of insurance the island has in place. The last time a weather-related cat bond paid off in full was in connection with Hurricane Ian in 2022, when several bonds suffered 100% losses in principal, according to Artemis, a data provider specializing in insurance-linked securities.
“The payment underscores the role of catastrophe bonds in effective risk management strategies and their efficiency in transferring catastrophe risks to capital,” World Bank Vice President and Treasurer George Waqif said in a statement on Friday.
Read more: The government says the Jamaica Catastrophe Bond has now been activated
Jamaica, which the World Bank estimates is the third most exposed to natural disasters, is also set to receive coverage in the form of pre-arranged credit and parametric insurance. His cat sits at the top of the Bond Insurance Tower.
Hurricane Melissa became the most powerful storm on record to hit Jamaica in part because the water has warmed and the air has been made wetter by global warming. The storm was the strongest ever recorded in the Atlantic Ocean, with winds reaching 185 mph shortly before making landfall in Jamaica. According to the Global Weather Attribution Analysis, wind speeds were five times greater due to climate change and 7% more severe due to climate change.
Read more: Here’s how badly Melissa was damaged by climate change
Cat bonds allow issuers – often insurers but sometimes entire countries – to transfer a portion of their risk to the capital markets. Appliance sales have soared amid rising risks from property exposure, inflation and climate change. Investors can potentially suffer large losses if a bond is triggered and generate significant profits if a default does not occur.
Jamaica lost any coverage from its cat bond last year when Hurricane Brill ruled that the wind pressure required for repayment had not been reached. This is despite the fact that the Prime Minister of Jamaica had declared the island a disaster area.
A calculation by Air Worldwide Corp., a third-party agent, concluded that Hurricane Melissa reached pre-existing parametric triggers that qualified the bond for full redemption, according to the World Bank. The analysis was based on the storm’s central pressure and track, as reported by the US National Hurricane Center.
Moody’s RMS event response estimates that total insured losses from Hurricane Melissa in Jamaica are likely to be between $3 billion and $5 billion.
“Hurricane Melissa was truly a generational event for Jamaica and will be the storm that defines the 2025 North Atlantic hurricane season,” Jeff Waters, director of Moody’s North Atlantic hurricane models, said in a statement.
“Repair and recovery will necessarily face significant supply chain challenges, even with several key ports operating on the island,” he said. “For these reasons, we expect recovery efforts to take several months, if not years.”
Image: The devastated North Street neighborhood after Hurricane Melissa made landfall in Black River, Jamaica on October 29, 2025. Photo credit: Ricardo Maquin/AFP/Getty Images
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