A senior Philippines government official has called publicly on China to do more to promote the production, sale and distribution of catastrophe bonds, in a region painfully prone to natural and climate-related calamities.
Benjamin Diokno, secretary of budget and management of the Philippines, said China should be the clear regional and global leader in this fast-growing corner of the debt market. “If China wants to lead on this, they can,” he told GlobalMarkets. “They have the Belt & Road initiative, and that costs them a lot of money. They can fund these kinds of bonds — and they should.
“Most countries are hard-up. Who has got the money? Not the US, which is heavily indebted. Of all the countries in the world, China has the greatest amount available” to invest in and support this kind of debt market instrument. “They have a lot of money.”
MORE TALK, MORE ACTION
Key to promoting the sector, he said, was more talk and more action. “People have to continue to talk at events like [the IMF/World Bank conference in Bali]. And we have to come up with a far bigger sum of money in preparation for combating future disasters.”
Pointing to the recent super-typhoon that crashed into the Philippines coastline, and the disastrous earthquake and tsunami that left more than 2,000 dead in Indonesia, he said there was a glaring need for regional governments and development banks to continue to communicate “in preparation for the next ‘big one’”.
Diokno was full of praise for the World Bank, which has promised to pay the Philippines almost $500m to help it recover from last month’s typhoon. Earlier this year, the Washington-based multilateral printed $1.36bn worth of parametric earthquake catastrophe bonds to support developing states in Latin America. Indonesia is eyeing the sale of catastrophe bonds as it looks for new ways to plan financially for the cost of mitigating against, and rebuilding after, natural and climate-related disasters.
“[The Word Bank is] coming up with many instruments, and they move quickly. They are helping us to draw down financial aid in the event of national emergencies without much fuss,” Diokno said. “But we need more help like this and more bonds. Even the IMF should be ready to issue this kind of print, and the Asian Development Bank should be another. They have a lot of money too.”
According to industry data provider Artemis, $11bn worth of new catastrophe bonds and related insurance-linked securities were printed in the first seven months of 2018, against $10.64bn in the whole of 2017.