Nepal and World Bank Sign Catastrophe Bond Agreement to Address Major Earthquake Risk
The Government of Nepal and the World Bank have signed a catastrophe bond agreement to mobilize immediate financial resources in the event of a major earthquake or natural disaster. Under this, the World Bank will conduct a feasibility study and design for a **3-year** parametric earthquake bond ranging from **USD 80 million** to **USD 190 million**. This agreement will provide Nepal with a modern financial mechanism to transfer disaster risk through global capital markets, rather than relying solely on traditional aid.
Kathmandu. The Government of Nepal and the World Bank have signed an agreement on a catastrophe bond (disaster risk bond) to mobilize immediate financial resources in the event of a major earthquake or natural disaster.
On 15 October 2026, the World Bank formally launched this ambitious plan to manage risk through capital markets in partnership with Nepal. The mandate agreement came into effect after approval by the Cabinet of the Government of Nepal.
Under this project, the World Bank will conduct a feasibility study and design for a 3-year parametric earthquake catastrophe bond for Nepal ranging from a potential USD 80 million (over approximately NPR 10 billion) to USD 190 million (approximately NPR 25 billion).
The catastrophe bond will have multidimensional impacts on Nepal's disaster management and financial situation:
- As soon as an earthquake occurs and the parametric trigger (e.g., specified criteria for earthquake magnitude and epicenter) is met, Nepal will receive funds immediately without delay.
- The compulsion to cut the development budget or reallocate funds from other headings to spend on rescue and relief during a disaster will be eliminated.
- Nepal will use a modern financial mechanism to transfer disaster risk through global capital markets, rather than relying solely on traditional foreign aid and loans.
- It will help accelerate search, rescue, and emergency relief operations without delay after a major disaster.
Nepal is one of the countries at highest risk of earthquakes in the world. Given the lessons learned from the Bikram Sambat 2072 great earthquake and recent earthquakes, the significance of this agreement for Nepal lies in building an economic safety net.
In the traditional model, support was mobilized through donations, aid, or new loans from donor agencies. In the catastrophe bond (new model), financial resources can be raised from investors in international capital markets. Whereas damage assessment used to take months and years, now payment will be made immediately upon meeting pre-defined weather index criteria. Instead of affecting the domestic budget and development construction, relief will now be operated through a pre-protected financial fund.
This agreement is not itself a loan or an immediately available amount. It means that with the World Bank's support, Nepal will create an insurance-like structure with international investors. If an earthquake meeting the specified criteria occurs, Nepal will be able to use the funds placed by investors for relief and reconstruction, which will make Nepal more economically self-reliant and disaster-resilient.