A trend towards smaller catastrophe bond issues becoming more feasible as market infrastructure improves has been highlighted by the Organisation for Economic Co-operation and Development (OECD), who suggest that what they term micro-catastrophe bonds have relevant application in disaster risk financing initiatives.
A policy brief authored by Kensuke Molnar-Tanaka and Prasiwi Ibrahim of the OECD Development Centre calls for insurance and catastrophe bonds to be considered as part of the micro-disaster risk financing toolkit for emerging parts of Asia.
The majority of natural disaster losses remain uninsured in emerging Asia, leaving the population vulnerable to financial shocks.
The authors believe that, “Micro-disaster risk financing tools, including micro-disaster risk insurance and micro-catastrophe bonds, can better respond to the specific losses that communities experience, based on more granular knowledge of local risks and needs.”
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