Parametric sovereign cat bonds: the way to insure the Belt and Road

Countries in Central Asia and Eastern Europe that have been recipients of Chinese investment via projects associated with its Belt and Road Initiative (BRI) should use parametric sovereign cat bonds to insure themselves against the risk of natural disasters.

That is the view of Kirill Savrassov, an insurance-linked securities (ILS) and sovereign risk transfer specialist.

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“China has spent tens of billions of dollars in infrastructure across the region but practically none of it is properly insured against physical damage, despite the region being at high risk from earthquakes and other natural disasters.

“In countries such as Uzbekistan, Kazakhstan or Tajikistan it is not a question of if an earthquake will hit, but when—and how devastating it will be.”

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Emerging markets governments are therefore looking for innovative ways to increase their access to finance to enable disaster response, recovery, and rebuilding—and Savrassov believes parametric sovereign cat bonds are the most logical and effective way for emerging markets to resolve their risk financing challenges.