Jeff Guo

And we all know what happened in 2020.

The coronavirus.

And coronaviruses were one of the six viruses covered by the World Bank's pandemic bond.

And by April, it was official.

The bond triggered.

The international investors lost their money.

Hundreds of millions of their dollars went to the World Bank to fund COVID-19 relief efforts in some of the poorest countries in the world.

These are all countries that face serious risks from hurricanes and earthquakes, but who also have fairly developed economies, like in Jamaica.

About five years ago, Jamaican officials were shopping around for some more advanced financial tools to protect themselves from hurricanes.

Back then, Fayval Williams wasn't yet the minister of finance, but she was a top official, and she remembers the conversations.

And Jamaica's hurricane bonds, they have had their critics because they're not cheap.

Last year, Jamaica issued $150 million worth of these bonds.

And Fayval says they have to pay their investors about 7% interest.

That's more than $10 million a year.

And the chances of the bond actually triggering are pretty low.

These cat bonds, they're designed only to cover those rare, once-in-a-generation hurricanes.

So when Jamaica went to the market with its catastrophe bonds, the country knew what it was buying.

It knew how much interest it would have to pay investors and how much insurance it wanted.

And that it would only pay out if there was a hurricane the size of, well, the one that came next.

You know, as this market for catastrophe grows, as catastrophe bonds become more and more mainstream, what it's doing is making the market for insurance bigger and hopefully more competitive.