Nepal and the World Bank (International Bank for Reconstruction and Development, IBRD) have signed a mandate agreement to explore the development of a catastrophe bond for quicker access to funds in case of a major earthquake.
The agreement between the two parties marks the beginning of a collaboration to assess how capital markets can support Nepal’s broader disaster risk management strategy.
The initiative is part of the World Bank Group’s established catastrophe bond program, which allows countries to access international capital markets to transfer disaster risk and secure financial protection against natural hazards.
As reported in July on our sister site, Artemis, it is understood that this proposed cat bond is going to be parametric in nature, meaning it would be designed to pay out based on pre-defined physical earthquake parameters, and targets USD 80-190 million of fully-collateralised disaster risk financing from the capital markets for the South Asian country.
These parameters could include magnitude and the severity of ground shaking, rather than actual assessments of financial and economic losses, it is anticipated.
Nepal is one of the world’s most disaster-prone countries and faces significant seismic exposure and earthquakes. The country said that it is working to better prepare for, withstand, and recover from future natural disasters through a combination of risk reduction, preparedness, and financial protection measures.
For context, on 26 August 2026, a Himalayan glacier and rock collapse near the Nepal-China border triggered flash flooding along an approximately 70-kilometre stretch of the Trishuli River, devastating communities across the Rasuwa and Nuwakot districts, resulting in significant humanitarian and economic losses.
According to analysts at AM Best, international reinsurers are expected to absorb a significant share of the event’s overall modest insured losses as the country’s non-insurance/" style="color:#c0392b;font-weight:700;text-decoration:underline;" class="hta-topic-link">life insurance market relies heavily on reinsurance capacity to underwrite catastrophe risks.
Under the agreement, the World Bank Group Treasury will work with the Government of Nepal and market participants to assess the feasibility and potential structure of the catastrophe bond.
If this project goes ahead, it would be the first catastrophe bond to cover risks in Nepal and a rare cat bond covering South Asian exposures.
