Translated with AI
The Asian Development Bank (ADB) announced the issuance of its first disaster relief bonds, aimed at covering the risks of earthquakes and extreme precipitation in Tajikistan and the Kyrgyz Republic. The bank's press service reported this.
These are so-called catastrophe bonds, issued as part of a regional multi-tiered disaster relief program. Their purpose is to mitigate financial losses from natural disasters and climate shocks, as well as to provide immediate liquidity after emergencies.
As ADB Vice President for Finance and Risk Management Roberta Casali noted, major natural disasters such as earthquakes and floods can significantly slow down countries' development. She stated that the new instrument will allow Central Asian countries to receive rapid and guaranteed financing, accelerating the recovery process.
The bonds issued provide targeted financial support in the event of severe earthquakes or floods. The mechanism is based on pre-defined and independently verified parametric triggers. In the event of a disaster, funds will be channeled through national social protection systems, primarily to assist the most vulnerable groups.
Three-year bonds were issued for the Kyrgyz Republic and Tajikistan in the amount of USD 80 million each. The coupon income is based on the secured overnight financing rate (SOFR) plus a funding margin of 4 basis points and a risk margin of 600 basis points. The bonds are issued at par value with a maturity date of May 30, 2029.
International financial institutions participated in the placement: Aon Securities LLC acted as the dealer, initial purchaser and arranger, and Munich Re acted as the transaction structuring agent.
The bonds have generated interest in international markets. Of the Kyrgyz Republic's bonds, 64% were placed in Europe and 36% in North and South America. For Tajikistan, these figures were 60% and 40%, respectively. Investors included specialized insurance securities funds, insurance and reinsurance companies, and fund managers.
The bonds will be listed on the Singapore Exchange. The project is being implemented with support from the Asian Development Fund, the Asia-Pacific Climate Finance Facility, and the Monetary Authority of Singapore's grant program.
Preparation for this publication was supported by ADB through the Central Asia Regional Economic Cooperation Program. Analytical and advisory work was provided by an international consortium led by WTW.
Representatives of the participating organizations noted that this mechanism allows for the transfer of natural disaster risks from the public to the private sector and expands insurance coverage options in the region.
ADB emphasized that the multi-tiered approach provides countries with financing instruments based on the scale of disasters and ensures targeted assistance through social protection systems.
The Asian Development Bank is a multilateral development bank operating in the Asia-Pacific region. Founded in 1966, it represents 69 countries, 50 of which are located in the region.
