Hurricane Melissa Causes Multi-Billion Dollar Losses in Jamaica, Catastrophe Bond Triggers Payout

Hurricane Melissa, the strongest storm to hit Jamaica in recorded history, caused catastrophic damage with sustained winds of 185 mph, destroying homes, infrastructure, and medical facilities. Jamaica's comprehensive disaster risk strategy, including a $150 million catastrophe bond issued with World Bank assistance, is expected to be triggered, providing rapid financial support to aid recovery efforts. Despite this, the overall economic impact is projected to reach billions of dollars, with insured losses alone expected to be substantial, though insurance penetration in Jamaica remains low at around 5%, which may limit rebuilding funds. Reinsurers are likely to bear a significant share of the losses, and other parametric insurance policies covering extreme rainfall and tropical storms are also anticipated to pay out. The storm's devastation poses long-term risks to Jamaica's tourism-driven economy, which accounts for roughly 35% of its GDP, potentially leading to severe disruptions. Jamaica's layered financial protection model may serve as a blueprint for other climate-vulnerable nations facing increasing risks from natural disasters.