For the first time in history, Peru secured a catastrophe insurance protection that covers earthquake-induced damages, the Economy and Finance Ministry (MEF) reported Tuesday.
This way, the Inca country will be provided with financial protection of up to US$200 million against losses from earthquakes.
The insurance covers low frequency and high severity catastrophes, allows international capital markets to absorb the risks, and complements financial instruments within the national risk management policy.
Issued by the World Bank on February 2, the said bond is part of a multi-country cat bond that covers the four member nations of the Pacific Alliance trade bloc.
According to MEF, the transaction marks a milestone in the Pacific Alliance's integration agenda, and the increasing demand in capital markets indicates the huge potential for further integration.
The earthquake catastrophe bond will provide Peru with per-occurrence protection over a three-year period, with maturity scheduled for February 2021.
Also, it covers seismic events of magnitude 7 or more in areas with severe economic and social losses.