World Bank CAT DDO pays out $20m for La Soufrière volcanic eruption

World Bank CAT DDO pays out $20m for La Soufrière volcanic eruption

The Governments of Saint Vincent and the Grenadines are set to get $20 million in catastrophe danger funding assistance from the World Bank to help their recovery from the recent eruption of the La Soufrière volcano, after a catastrophe contingent credit line was triggered.The eruption of the La Soufrière volcano on Saint Vincent has set off a Catastrophe-Deferred Drawdown Option (CAT-DDO) instrument, that is designed to open up a World Bank line of credit after a natural catastrophe or disaster event triggers an emergency declaration.
The Catastrophe-Deferred Drawdown Option (CAT-DDO) is a threat financing instrument that acts a little like a parametric catastrophe bond, in that they offer a source of capital contingent on a disaster being stated in the recipient country.
While comparable to an insurance coverage or reinsurance policy, or a catastrophe bond, in the arrangement of disaster contingent threat financing, CAT-DDOs differ as when triggered the contingent financing center opens up a loan, or credit line to the World Bank, that does need to be repaid, albeit at attractive terms.
The Catastrophe-Deferred Drawdown Option (CAT-DDO) has been commonly utilized by emerging economies as part of their disaster danger financing toolkits.
The World Bank has actually already paid out the US $20 million in support of the Government of Saint Vincent and the Grenadines reaction to the La Soufrière volcano eruption.
The eruption began on April 8th and has continued through recent days, with Saint Vincent blanketed in other and ash Caribbean islands also impacted.
In general, more than 20,000 individuals have actually been left from the high-risk zones around the volcano itself, both to other parts of Saint Vincent and surrounding nations.
Surges and explosive eruptions are continuing, with falling ash now seriously impacting air quality and infrastructure affected, as evidenced through disruptions in electrical energy and water supply.
Saint Vincent and the Grenadines Catastrophe Deferred Drawdown Option (Cat-DDO) was approved by the World Bank in June 2020, to supply a contingent line of financing in case of future natural or health-related disasters.
The Cat DDO is triggered by the Government stating an emergency and funds can quickly be partly or completely drawn down by the beneficiary nation. The instruments offer this contingent defense across a three-year term and can be renewed for an extra three years.
” Our hearts are with the individuals of Saint Vincent and the Grenadines during this crisis,” Tahseen Sayed, World Bank Country Director for the Caribbean commented. “We are committed to supporting the reaction efforts at this crucial time when the country faces this new catastrophe while currently managing the social and financial impacts of the pandemic.”
The Catastrophe-Deferred Drawdown Option (CAT-DDO) again shows its worth as a catastrophe danger funding tool, while likewise preparing federal governments for higher usage of catastrophe insurance coverage, reinsurance and other threat funding options including disaster bonds.
Just recently, the Danish Red Cross successfully sponsored issuance of the worlds first pure volcanic risk disaster bond.

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