Mexico - Making a measurable difference

April 2012 - In the aftermath of a massive earthquake or when a hurricane leaves massive damage, putting help on hold is not an option. Swiss Re, the International Bank for Reconstruction and Development (part of the World Bank) and the Mexican Government had that clear in their minds when they created MultiCat Mexico 2009.

Based on a parametric approach, this cat bond runs for three years. It is the latest proof of Mexico’s pole position in securing funds to meet emergency relief efforts prior to the event occuring.

The payout of the 2009 MultiCat bond is linked directly to pre-defined triggers, in this case related to the strength of an earthquake measured in Magnitude terms, or for the windstorm part related to the lowest air pressure measurement as a key indicator for hurricane strength. The transaction contains four tranches, each relating to a different peril or geographic areas, with potential payouts of USD 140 million to cover earthquakes and USD 50 million to cover hurricanes in two Pacific coastal regions and one Atlantic region.

Earthquake cover

For the earthquake cover, three seismic zones were identified covering the Northwest Cocos, Central Cocos and Mexico City regions. For the hurricane cover, payout is triggered if a storm passes through one of the coastal zones and the pressure at the centre of the storm is the same as or below 944 mb for the Pacific coastal regions and 920 mb for the Atlantic coastal regions.

Swiss Re acted as co-lead manager and joint bookrunner for MultiCat Mexico 2009. This transaction epitomises our commitment to working with the public sector to make a measurable difference.

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