Fwd: Melissa's catastrophic damage

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Loretta Lohman

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Oct 29, 2025, 11:13:16 AM (10 days ago) Oct 29

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Melissa is the worst hurricane this year and the first Category 5 storm on record to make landfall in Jamaica. It has now hit Cuba as an “extremely dangerous storm.” Though it will take days to know the full extent of damage, early reports already show flooding, landslides and chaos.

Melissa is almost certain to trigger a full payout from Jamaica's catastrophe bond, showing that capital markets can help provide valuable financial backing when disaster strikes. Today’s newsletter offers some insight and context on the workings of the cat bond market, and shows how a niche investment product is playing an ever larger role in addressing the cost of climate change.

The devastation that the storm unleashed is a vivid portrait of the threats small and vulnerable nations face as the world warms. Adapting to these threats is essential, but funding for it is slowing down. The yawning gap is $300 billion per year, the UN said in a report released today.

Did someone else send you this newsletter? Subscribe to Green Daily for more news on how investors are reacting to climate-related extreme weather events.

The cost of catastrophe

By Gautam Naik

Investors in Jamaica’s catastrophe bond now face a full trigger event that would force payment of the entire $150 million bond to help the island deal with fallout from Hurricane Melissa.

That’s according to Florian Steiger, chief executive of Icosa Investments AG, a Swiss investment firm specializing in alternative fixed-income strategies.

“We expect the cat bond to pay out in full or at least close to it,” he told Bloomberg on Tuesday.

Jamaica’s cat bond, which was arranged by the World Bank, is designed as the ultimate backstop to help provide funds to pay for only the most extreme weather events. The last time a weather-related cat bond paid out in full was in connection with Hurricane Ian in 2022, when several bonds suffered a 100% loss in principal, according to Artemis, a data provider specialized in insurance-linked securities.

Hurricane Melissa in the Caribbean on Oct. 28, 2025. Source: NOAA

Jamaica narrowly missed getting any coverage from its cat bond last year when Hurricane Beryl hit, after it was judged that the air pressure required for a payout wasn’t reached. That’s despite the fact that Jamaica’s prime minister had declared the island a disaster area.

Hurricane Melissa became the first recorded Category 5 storm to strike Jamaica, coming ashore on Tuesday as one of the most powerful landfalls ever observed in the Atlantic. The storm had estimated maximum sustained winds of 185 miles (298 kilometers) per hour, according to a 1 p.m. New York time advisory from the US National Hurricane Center. The high winds and flooding rains put at risk the country’s residents and at least 25,000 tourists still on the island.

Losses from Hurricane Melissa may fall short of early estimates that went as high as $16 billion, said Chuck Watson, a disaster modeler with Enki Research. He now estimates losses will reach $6.5 billion, comparable to the impact of Hurricane Gilbert in 1988.

A spokesperson for the World Bank said it is closely monitoring Melissa’s location and severity. Jamaica’s catastrophe bond includes parametric triggers based on storm characteristics such as its central pressure and path, and the World Bank will provide updates as they become available, the spokesperson said.

The world’s growing reliance on capital markets to deal with such events coincides with a steep increase in costs caused by natural catastrophes. Insured losses tied to extreme weather are set to exceed $150 billion this year, which is well above the historical average, according to risk modeler Verisk. Since 2023, meanwhile, the market for cat bonds has grown by well over 50% to $55 billion, estimates provided by insurance broker Aon Plc show.

Cat bonds allow issuers — often insurers but sometimes also whole countries — to pass part of their risk to capital markets. Sales of the instruments have soared amid increasing risk from property exposure, inflation and climate change. Investors can face potentially large losses if a bond is triggered and can generate significant returns if a predefined catastrophe doesn’t occur.

Read the full story and find the latest on Hurricane Melissa’s destructive path on Bloomberg.com.

A growth industry

$55 billion

The growth of the cat bond market since 2023. That’s a 50% increase, according to estimates provided by insurance broker Aon Plc.

Another option

“Rather than pay cat bond premiums, we’d much prefer to find cheap long-term financing to build resilience, say, a sea wall.”

Avinash Persaud

Special advisor on climate change to the president of the Inter-American Development Bank

The Caribbean is the world’s most exposed region to climate-related natural disasters, according to the IMF

A $300 billion adaptation gap

By Leslie Kaufman and Fabiano Maisonnave

A worker carries a carton of water through floodwater in Bekasi, Indonesia Photographer: Dimas Ardian/Bloomberg

The devastation unleashed by Hurricane Melissa on Jamaica vividly illustrates the threats faced by small and vulnerable nations as the world warms, whether from storms, floods, wildfires or drought. Money to fund adaptations to blunt those impacts is not just failing to keep up with needs — it is actually slowing down, according to a report by the UN Environmental Programme released today.

UNEP estimates that developing countries will need from $310 billion to $365 billion in adaptation finance per year by 2035. The Glasgow Climate Pact, agreed at the COP26 summit in 2021, called for developed countries to provide about $40 billion per year by 2025, well short of what is needed. But even that “is not coming,” Inger Andersen, UNEP’s executive director, writes in the foreword to Adaptation Gap Report 2025: Running on Empty.

Adaptation finance from rich to developing countries declined from $28 billion in 2022 to $26 billion in 2023. While the figures for 2024 and 2025 were not available to the report authors, UNEP warns the trend is clear: Future needs are approximately 12 to 14 times as much as current flows of international public money.

The report does have some positive news. The poorest countries and small-island states at high risk from climate change have smaller gaps. More than 170 out of 197 countries worldwide now have a national adaptation plan, strategy or policy in place, up slightly from last year. And more nations are beginning to “mainstream adaptation into their regular planning policy,” according to the report.

Read the full story on Bloomberg.com.

Opinion: Brazil’s forests did better under Bolsonaro

By David Fickling

An area of deforestation in the Amazon Photographer: Ivan Valencia/Bloomberg

Whatever happened to the savior of the Amazon?

Brazil’s President Luiz Inacio Lula da Silva once had a decent claim to that title, but the data tell a different story. Last year, some 4.4 million hectares was lost in Brazil, including 2.8 million of untouched primary land. That’s the third-largest annual figure this century, and comfortably more than in any year under Lula’s predecessor Jair Bolsonaro, who reveled in the nickname “Captain Chainsaw.”

Read the full opinion column on Bloomberg.com.

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