IDB Expands Disaster Risk Solutions Across Latin America and the Caribbean Through Capital Markets

The Inter-American Development Bank (IDB) and IDB Invest are taking significant steps to strengthen disaster risk protection across Latin America and the Caribbean by leveraging reinsurance and capital market tools.

A New Regional Disaster-Risk Transfer Program

At the heart of this initiative is the Regional Disaster-Risk Transfer Program, a newly introduced platform that gives countries in the region easier access to financial protection through reinsurance and capital markets. This is particularly important for smaller, more vulnerable economies that often struggle to secure adequate disaster coverage.

Initially, the program will assist Belize, Honduras, and Panama in safeguarding against major natural hazards such as hurricanes, floods, droughts, earthquakes, and wildfires. The IDB expects the program to expand over time, potentially through collaborative risk-pooling strategies. Countries like Spain and France have already shown interest in supporting this effort.

As the initiative evolves, it’s likely to explore additional financial instruments such as catastrophe bonds and other insurance-linked securities (ILS) to help spread disaster risk more broadly across global markets.

Strengthening Sovereign Disaster Protection

Alongside this market-based strategy, the IDB is significantly increasing its sovereign disaster risk coverage by $2 billion. This expansion includes:

• A $1 billion boost to the IDB’s Contingent Credit Facility for Natural Disasters, increasing total protection to $5 billion by 2026. This facility offers rapid access to funding that helps countries provide emergency aid, restore essential services, and quickly respond to crises.
• An additional $1 billion for Climate Resilience Debt Clauses, which will allow countries facing qualifying disasters to temporarily pause debt repayments. This gives governments critical financial breathing room to prioritize emergency response and recovery efforts.

Supporting the Private Sector

On the private investment side, IDB Invest is introducing an innovative risk management tool specifically designed for the private sector. This new mechanism will protect private investments from external shocks that can disrupt business operations.

The debt clauses tied to this solution offer options such as deferring loan repayments or extending loan terms by up to two years, making it easier for businesses in sectors like agribusiness, energy, tourism, and infrastructure to withstand the impacts of disasters.

Building Resilience for the Future

“These expanded financial protections will empower countries and companies to better manage disaster risks,” said IDB President Ilan Goldfajn. “With these tools in place, we can improve resilience, speed up recovery, and ensure that funding is available when it’s needed most.”

The newly launched initiatives are part of the Ready and Resilient Americas program, which began in March 2025. This broader regional effort focuses on improving cooperation, preparedness, and financial safeguards against natural disasters.

Earlier this year, the IDB also announced plans to assist Latin American and Caribbean nations in issuing catastrophe bonds and utilizing risk-transfer swaps, further demonstrating its commitment to enhancing disaster resilience through innovative financial solutions.