Why Mexico’s cat bond won’t pay out yet

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By Craig McGlashan
21 Sep 2017

The devastating earthquake that hit Mexico this week could well mean a pay-out from a World Bank catastrophe bond issued in early August that provided the country with insurance protection against such a disaster. But Mexico’s chosen structure for the bond means that any cash payment is unlikely to be made for at least 30 days, while more data is collected.

If an earthquake — or on the other two tranches of the bond, a tropical storm in either the Atlantic or the Pacific — activates the trigger on the $150m August 2020 Class ‘A’ earthquake tranche of the $360m bond, then money will be released to the Mexican ...

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