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IBRD Funding Program

Capital at Risk Notes

  • The World Bank Capital at Risk Notes program facilitates risk transfer solutions for the World Bank and its clients using the capital markets. Under this program, the World Bank issues notes where some or all of the investors’ principal may be at risk, such as catastrophe bonds (cat bonds) and pandemic bonds.

    Capital at Risk Notes are issued under the World Bank’s Global Debt Issuance Facility and receive the same tax and securities law exemptions, but they may not be assigned any security rating or may be assigned a lower security rating than the Facility. 

    Benefits to Investors

    • Potential yield enhancement
    • Opportunity to include new perils and regions to diversify portfolios

    Examples of Capital at Risk Notes issues

  • What are catastrophe bonds?

    Catastrophe bonds allow entities exposed to natural disaster risk, to transfer a portion of that risk to bond investors.

    Catastrophe bonds work in a similar manner to insurance, paying out when a disaster event meets certain pre-defined criteria (e.g., a specified earthquake magnitude).

    In a typical catastrophe bond structure, the entity exposed to the risk (known as the “sponsor”) enters into an insurance contract with a SPV that issues the bonds to investors. The SPV invests the proceeds of the bond issuance in highly rated securities that are held in a collateral trust, and it transfers the return on this collateral, together with the insurance premiums received from the sponsor, to the investors as periodic coupons on the bonds.

    If a specified natural disaster occurs during the term of the bond, some or all of the assets held as collateral are liquidated and that money is paid to the sponsor as a pay-out under its insurance contract with the SPV. If no specified event occurs, the collateral assets are liquidated on the maturity date of the bonds and the money is paid to the investors.

    World Bank issued catastrophe bonds do not require an SPV. Instead, the sponsor (or World Bank client) enters into an insurance or derivative contract with the World Bank. The World Bank issues the bonds to investors, invests the proceeds, and manages payments to the sponsor and investors.

  • The 2014 Ebola crisis in West Africa highlighted the difficulty in rapidly mobilizing funding from the international community to contain a pandemic outbreak. To address this challenge, the Pandemic Emergency Financing Facility (PEF) – housed at the World Bank – was launched in 2016 to provide an additional source of financing to the world’s poorest countries when they face cross-border, large-scale outbreaks. PEF financing consists of funding provided by Australia, Germany, IDA, and Japan as well as insurance coverage provided in 2017 through catastrophe bonds issued by the World Bank and sold to coapital market investors as well as insurance-linked swaps executed by the World Bank with insurance companies.

    For more information about PEF please visit

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