Banking News – An agreement has been reached between the Government of Nepal and the World Bank for earthquake risk protection. The agreement was signed today at the ongoing Annual Meetings of the World Bank and the International Monetary Fund in Thailand. In the presence of Finance Minister Swarnim Wagle, Finance Secretary Ghanashyam Upadhyay and World Bank Group Vice President Jorge Familiar signed the agreement.

Finance Secretary Upadhyay informed that following the agreement, the path has opened for developing a Disaster Bond (Catastrophe Bond) so that Nepal can receive funds quickly in the event of a major earthquake in the country. He stated that this is only the beginning, and all types of natural disaster risks can also be protected simultaneously. He said that this agreement has initiated collaboration to evaluate how the capital market can support Nepal’s comprehensive disaster risk management strategy.

As Nepal is one of the most disaster-prone countries in the world, this will also help Nepal become better prepared for future natural disasters through a combination of risk reduction, preparedness, and financial protection measures, and contribute to enhancing the capacity to face and recover from them. Under the agreement, the World Bank Group’s Treasury, together with the Government of Nepal and market participants, will evaluate the feasibility and possible structure of such a transaction.

This initiative is part of the World Bank Group’s established Catastrophe Bond program, which has helped countries transfer disaster risk and gain access to international capital markets to ensure financial protection against natural disasters. The Government of Nepal had previously decided to enter into a mandate agreement with the World Bank regarding the Earthquake Disaster Risk Protection Bond (Cat Bond) project. Based on that same decision, the bilateral agreement has now been signed.

According to Artemis, an international news portal on insurance and disaster risk financing, this decision has opened a formal path to advance the earthquake disaster risk protection bond project proposed by the World Bank for Nepal. The World Bank had begun work on a project to issue such a bond for Nepal since last July. Under the proposed project, the goal is to raise 8 million to 19 million US Dollars in disaster risk financing from international capital markets. It has been stated that this amount will be used for managing the risk of major economic losses caused by earthquakes.