Waylon Wong

By 2019, some people were criticizing the World Bank for this deal because here these investors were making fat profits.

And what were the chances even that there would be a worldwide pandemic that could trigger this bond?

One famous economist called the whole thing an embarrassing mistake.

Nowadays, entire nations are turning to cat bonds to protect them from the risk of natural disasters.

Michael and his team at the World Bank kind of pioneered the idea.

They've been helping countries design their own catastrophe bonds.

They've worked with the governments of Mexico, Chile, and Colombia, the Philippines.

In 2021, Jamaica worked with the World Bank to offer its very first catastrophe bond to international investors.

Now, the way they're designed, the government only gets a payout if a really serious hurricane passes over Jamaica.

There are actually specific meteorological requirements.

The bond documents have this map of Jamaica divided up by a grid.

And for the bond to trigger, there has to be at least this amount of air pressure in this part of the grid.

Take Hurricane Beryl last summer.

It hit the southern coast of Jamaica with Category 4 winds, causing an estimated $995 million of damage.

But the Jamaican catastrophe bond still didn't trigger.

After Hurricane Beryl, people had a lot of questions for Fayval's predecessor, the previous minister of finance, Nigel Clark.

He was the one who originally set up the bond.

And they were asking him, like, why are we paying millions for insurance that doesn't pay out?

Fayvil's predecessor explained that for smaller hurricanes, Jamaica has a whole portfolio of other financial safety nets.

It has multiple rainy day funds, emergency loan agreements, other types of insurance.