The Government of Nepal and the World Bank Group have announced a partnership to develop a catastrophe bond (Cat Bond) designed to protect Nepal against the financial impact of major earthquakes. The agreement follows discussions between Finance Minister Dr. Swarnim Wagle and senior World Bank officials in Washington and seeks to create a mechanism through which disaster losses can be partly absorbed by international capital markets.

A Mandate Agreement was signed on behalf of Nepal by Finance Secretary Dr. Ghanashyam Upadhyay, in the presence of the finance minister, while the World Bank was represented by its Treasury Vice President Jorge Familiar Calderón. The arrangement is expected to establish a framework enabling Nepal to access rapid financial resources immediately after a major earthquake, reducing pressure on the national budget during emergencies.

Under the agreement, the World Bank’s Treasury Department will work with the Nepal government and market participants to assess the feasibility of the instrument, determine its structure and prepare for possible issuance. The initiative is expected to complement Nepal’s existing disaster-risk tools, including risk reduction, reinsurance and financial protection mechanisms, while improving preparedness and post-disaster recovery capacity.

Catastrophe bonds are capital-market instruments that transfer specified disaster risks from governments or insurers to investors. Nepal expects the proposed bond to help shift part of its high earthquake exposure to global investors and broaden access to international capital for protection against natural disasters.