LONDON, Dec 9 (Reuters) - A “resilience bond”, a variation on a catastrophe bond, could help cities deal more effectively with climate change-related disasters, according to a report funded by the Rockefeller Foundation.
A traditional catastrophe bond is issued by cities or governments to protect against the losses from a pre-defined natural catastrophe. Investors lose their money if the disaster happens, leaving the city or government borrower with money to pay for clean-up costs.
But the bonds do not help to lessen the size of catastrophe-related losses.
Under the proposed resilience bond structure, a city could pay lower interest payments on the bond if it built infrastructure such as a sea wall to reduce the catastrophe impact, according to the report, whose contributors include reinsurer Swiss Re and catastrophe risk modelling firm RMS.
A record $8 billion were launched in catastrophe bonds last year, according to reinsurance broker Aon Benfield.
Green bonds, used more broadly to finance environmentally friendly projects, saw a record $38.4 billion in new issuance this year, according to the Climate Bond Initiative. (Reporting by Carolyn Cohn; Editing by Janet Lawrence)