Jamaica's Catastrophe Bond Faces Trigger Risk As Devastating Hurricane Melissa Nears Landfall
Hurricane Melissa is expected to make landfall in Jamaica today as a devastating Category 5 storm.
Prime Minister Andrew Holness warned that no Caribbean nation could withstand such a powerful force.
Now, the catastrophe bond (cat bond) market that provides coverage for the Government of Jamaica is in focus, amid the risk of triggering.
The NHC said Hurricane Melissa is forecast to make landfall on the southern coast of Jamaica with maximum sustained winds of 175 mph and torrential downpours expected to produce 15 to 30 inches of rain, with up to 40 inches possible in isolated areas. Storm surge could reach as high as 13 feet along Jamaica's south coast. Inland regions face a high risk of flooding and deadly landslides.
"Hour by hour, it is becoming apparent that the impact of Hurricane Melissa will be greater than the impact of Hurricane Beryl, certainly in terms of rainfall and flooding," PM Holness warned earlier. As of early Tuesday, the NHC placed the storm 55 miles west-southeast of Negril, or about 265 miles southwest of Guantánamo, Cuba.
Morning Update – Hurricane #Melissa is on final approach – and unfortunately, she’s showing no signs of weakening. Landfall is imminent.
To Jamaica – this will be unlike anything you’ve seen in your lifetime. Prepare yourselves – it’s going to get bad. Very bad
Waters will rise… pic.twitter.com/6lLnQoSn9W
— Brady Harris (@StormCat5_) October 28, 2025
Destructive winds exceeding 175 mph have shifted attention to the cat bond market, where the Caribbean island renewed a $150 million cat bond last year. The bond was initially issued by the World Bank in 2021 and renewed in April 2024. It effectively transfers extreme-loss hurricane risk to the capital markets. Now, it appears that this cat bond, covering the 2024–2027 hurricane seasons and maturing in late 2027, could be triggered.
Dr. Nigel Clarke, Jamaica's Minister of Finance and the Public Service, issued a statement in April 2024 when the $150 million cat bond was renewed, saying:
"Jamaica is pleased to have sponsored the second catastrophe bond in the international capital markets protecting Jamaica against natural disasters, with the much-appreciated support and assistance of the World Bank. Consistent with our National Natural Disaster Risk Financing Policy, we seek to ensure the availability of fiscal resources to enable an immediate response to emergency expenditures that could arise from a direct hit by a high-intensity hurricane. This catastrophe bond covers hurricane seasons 2024, 2025, 2026, and 2027 and complements other disaster risk-financing instruments that we have in place. We express our gratitude to the Hong Kong Insurance Authority, who supported the transaction financially."
Centralized air pressure at 8am is 952mb, which is enough to trigger it on its own. The instrument is parametric meaning it must satisfy specific parameters ie a specific pressure AND in a specific area as per grid below. Melissa is likely to meet both requirements together. pic.twitter.com/YjawxhgyCy
— Keenan Falconer (@keenanfalconer) October 26, 2025
The National Hurricane Center (NHC) cautioned that Melissa's 175 mph winds could cause "total structural failure" and lead to widespread power and communication outages across the island.
Tyler Durden
Tue, 10/28/2025 – 09:20