Hurricane Melissa, the strongest storm to hit Jamaica in recorded history, devastated the island as a Category 5 hurricane last week, killing 32 people and causing billions in damage. The storm's aftermath has tested Jamaica's multi-layered financial resilience plan, including a $150 million catastrophe bond that will now pay out in full. Experts highlight the country's preparations as a potential model for other vulnerable nations amid worsening climate-driven disasters.
Hurricane Melissa struck Jamaica last week with wind speeds of 185 miles per hour, flattening thousands of homes and leaving much of the country without electricity, cell service, or passable roads. In Trelawney Parish, a rural agricultural area, firefighter Ronell Hamilton described the scene: “Everything here is brown right now. It looks like California.” The storm has “almost completely annihilated” the region, with severe damage even to hurricane shelters like schools and fire stations in Wakefield. Black River, the epicenter, saw an estimated 90 percent of structures destroyed.
The disaster claimed at least 67 lives across the region: 32 in Jamaica, 34 from flooding in Haiti, and one in the Dominican Republic. Early estimates peg insured losses at up to $4 billion and total damages in Jamaica at about $7 billion, though full assessments are ongoing due to ongoing disruptions.
Climate change intensified the storm, according to analyses. A rapid study from Imperial College London found it made Melissa four times more likely, while World Weather Attribution reported climate change boosted wind speeds by 11 percent and rainfall by 16 percent compared to a pre-warming world. Warming oceans and air, which hold 7 percent more moisture per degree Celsius of warming, fueled the hurricane's power.
Jamaica's response draws on decades of planning since Hurricane Gilbert in 1988. At its core is a $150 million catastrophe bond, first issued in 2021 and renewed last year, triggered by parametric standards like central pressure below 900 millibars. It will now provide full payout for recovery. The bond, which offers high interest rates to investors in exchange for disaster risk, is part of a broader system including an emergency budget, parametric insurance from the Caribbean Catastrophe Risk Insurance Facility (CCRIF), and a prearranged credit line.
Carolyn Kousky, associate vice president for economics and policy at the Environmental Defense Fund, praised Jamaica's approach: it has “made this really beautiful stack [of financing tools] to cover disasters.” This setup avoids delays in traditional aid, which can be slow or mismatched to needs.
However, challenges loom. Sara Jane Ahmed, managing director and finance advisor to the V20 Ministers of Finance, questioned if such bonds would remain available after a large payout, potentially deterring investors. Jeff Schlegelmilch, director of Columbia University’s National Center for Disaster Preparedness, emphasized prevention: “The biggest problem with catastrophe bonds is that they come after the disaster, not before, to prevent it from happening.” He advocated for investor support in adaptation measures like infrastructure upgrades to reduce future risks and payouts.
Kousky noted the difficulty in attracting adaptation investments, as “avoided losses are not really a cash flow.” Innovations, such as directing bond interest toward resilience like fortified roofs in North Carolina, could bridge this gap. A week post-storm, Hamilton reported: “there’s still no electricity, still no water,” with food running out, underscoring the urgency of recovery.