Barbados embeds parametric nat cat clause in sovereign bond issue

The Caribbean island nation of Barbados is one of the first in the world we’ve heard of to embed a parametric natural catastrophe event trigger within a sovereign bond issuance, with the occurrence of a natural disaster able to trigger a deferral of payments to holders of the dollar-denominated bond.

Interestingly, Barbados has elected to work with the CCRIF (Caribbean Catastrophe Risk Insurance Facility), a provider of sovereign parametric natural catastrophe insurance to Caribbean and Central American countries, as the reporting agent of sorts for its recent bond issuance.

This isn’t a catastrophe bond, but it is another interesting way of protecting the economic interests of a country against additional burden created by the occurrence of major natural disasters.


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