It has been confirmed that Peru will receive a $60 million partial pay-out from its earthquake catastrophe bond, which was triggered by a magnitude 8.0 earthquake that hit the country on 26th May.
Sources at our sister publication, Artemis, have verified that the $200 million IBRD CAR 120 Peru quake catastrophe bond will pay out 30% of its principle to the government of Peru.
The cat bond is part of the Pacific Alliance issuance, which covers the four member nations of trade bloc with parametric earthquake insurance protection, issued by the World Bank.
The structure of the bond meant that notes are able to be triggered with a range of payout amounts, set at 30%, 70%, or 100% of the bond’s principal, dependent on various predetermined parameters, such as the epicentre, magnitude, location and depth.
It had been anticipated that the bond could pay out at this level since late May, due to the magnitude 8.0 strength of the earthquake.
Risk modeller AIR Worldwide, which acted as the calculation agent for the IBRD bond, has since confirmed that the strength and location of quake were sufficient to trigger the pay out, according to reports.
The earthquake itself is thought to have caused minimal impact to the domestic insurance markets in Peru, partly due to the low insurance penetration in the region, and partly due to the fact that it primarily affected fairly remote and less populous regions of the country.
The quake had a depth of approximately 68 miles, and could be felt in Ecuador, Colombia and Brazil, although damages in these neighbouring regions were also minor, without any collapse of structures.
Recoveries under Peru’s World Bank and IBRD issued catastrophe bond are now set to flow into the Republic of Peru’s disaster fund, which was set up by the government as a way to boost its financial and risk management strategy, to be put towards recovery following any qualifying earthquake disaster.
