The government of Mexico has now finalised its main insurance protection for natural disasters and severe weather events for the coming year, doubling the size of its parametric catastrophe insurance arrangement to around US $575 million for 2026 into 2027.
The government has a federal strategy for Financial Management of Disaster Risks, with its insurance arrangements running from the middle of the year.
The World Bank facilitated catastrophe bonds used to be the main parametric protection for Mexico, with the country having been a beneficiary of cat bond protection since the groundbreaking CAT-Mex Ltd. transaction back in 2006, but in recent years it has built up parametric insurance protection as well.
At its latest renewal, the Mexican government’s Ministry of Finance and Public Credit explained that in total $10.4 billion pesos of catastrophe insurance protection has been secured, a doubling from the prior year.
The main component of this is $10 billion pesos (around US $575 million) of parametric catastrophe insurance, which has been placed in the market for the 2026-2027 coverage year.
The government said this “reinforces its commitment to protecting the population from potential natural disasters,” while the doubling of the coverage expands its “capacity to protect public assets and provide timely assistance to the population affected by natural phenomena.”
The largely parametric catastrophe insurance renewal runs from June 5th 2026 to May 5th 2027 and provides risk transfer protection against earthquakes, volcanic eruptions, hurricanes, and floods of medium to high severity.
The renewal features two components, a $400 million pesos Loss Management Fund and the $10 billion pesos parametric insurance cover, which has been structured to guarantee a timely financial response to high-severity catastrophes.
Agroasemex, S.A., a Mexican government insurance institution, is the conduit for the global market capacity that supports this significant parametric arrangement, we understand. With the parametric cover placed on a reinsurance basis to protect the insurer.
Agroasamex has been the conduit for catastrophe bond coverage to get back to the government in the past as well and over now two decades it has partnered with reinsurance entities, development banks and capital markets investors to support Mexico’s disaster insurance needs.
The Mexican government explained that the parametric catastrophe insurance secured will be a key component of a risk management strategy to protect federal public assets.
This strategy includes the provision of property insurance to government agencies and entities, as well as its existing catastrophe bond, boosting budgetary resources to protect the population and address the effects of natural disasters.
Mexico was most recently in the catastrophe bond market in May 2024, when it secured $420 million of parametric protection against earthquakes and Atlantic hurricanes from the capital market through the IBRD CAR Mexico 2024 catastrophe bond transaction, and a further $175 million of parametric Pacific named storm protection through the IBRD CAR Mexico 2024 (Pacific).
That $595 million of parametric catastrophe bond backed disaster insurance remains in-force until April 2028, locking in long-term cover for the country.
Mexico remains the longest-standing and most prolific sovereign sponsor of catastrophe bonds, with eight individual offerings that have come to market for the country over the last two decades.
The government of Mexico now has around US $1.17 billion of parametric protection in-force, thanks to this doubling of its parametric insurance arrangements and the still in-force World Bank supported cat bonds.
