The ADB has issued its first $80 million in “catastrophe bonds” for Kyrgyzstan

The Asian Development Bank has issued its first series of Disaster Resilience Bonds (DRBs), which include Kyrgyzstan and Tajikistan. This new instrument is designed to provide rapid financing in the event of major natural disasters.

A three-year $80 million bond issue maturing in May 2029 has been placed for Kyrgyzstan. The yield on the securities is linked to the SOFR rate (author’s note — the “benchmark” interest rate in the U.S. dollar money market) with additional premiums for funding and risk, specifically a funding margin of 4 basis points and a risk margin of 600 basis points.

The bonds feature so-called parametric triggers. Payments will be made automatically upon the occurrence of predefined events—such as major earthquakes or floods. The funds will be channeled through national social protection systems, primarily to support vulnerable segments of the population.

As noted by the ADB, the instrument ensures “rapid and guaranteed liquidity” following disasters, which is particularly important for developing countries where such events can set the economy back by years.

The placement attracted interest from international investors. 64% of the Kyrgyz issue was purchased in Europe, and another 36% in North and South America. Investors include specialized insurance securities funds, insurance and reinsurance companies, as well as asset managers.

“We are pleased with the active response from the global investment community, whose support has facilitated the transfer of sovereign natural disaster risks from the public sector to the private sector,” noted Jordan Brown, Managing Director of Aon Securities in the Asia-Pacific region.

Aon Securities acted as the lead manager for the transaction, while Munich Re provided structuring. The bonds are scheduled to be listed on the Singapore Exchange.

Christopher Au, Senior Director at WTW, emphasized that the issuance is part of a broader regional multi-tiered financing program designed to mitigate financial risks from climate and natural shocks and, over time, attract more private capital to manage such risks.