PRODUCT NOTEIBRD Development Policy Loan with Catastrophe Deferred
Drawdown Option (Cat DDO)
Highlights• A contingent financing line that provides
immediate liquidity following a natural
catastrophe including natural disasters andpublic health emergencies caused by abiological event.
• Funds become available for disbursement after
the drawdown trigger – typically the country’s
declaration of a state of emergency – is met.
• At approval, a country must have an adequate
macroeconomic policy framework and asatisfactory program in place to manage risksof natural disasters and public healthemergencies, which the Bank will monitor
periodically.

The Development Policy Loan with a Catastrophe Deferred
Drawdown Option (DPF Cat DDO) is an IBRD Flexible Loan (IFL)
product. It enhances countries’ crisis preparedness andprevention through policy and institutional actions as well as
the requirement for a satisfactory program for managing
related risks, which the Bank monitors during implementation.
The DPF Cat DDO also enhances countries’ response to natural
catastrophes, as it provides a contingent financing line thatoffers immediate liquidity to IBRD-eligible (including Blend)countries 1 to address shocks related to natural disasters andpublic health emergencies caused by a biological event.
Approved prior to the disaster, the DPF Cat DDO disburses
quickly once the event occurs, the drawdown trigger is met - if
the program implementation remains satisfactory. It serves as
early budget support while funds from other sources, such as
bilateral aid or reconstruction loans, are being mobilized.
The DPF Cat DDO is most effective as part of a broader risk
management strategy in countries highly exposed to natural
disasters and public health emergencies. The DPF Cat DDO
may also be complemented by other risk retention and risk
transfer instruments that provide post-disaster liquidity, coverlosses, or support reconstruction. Governments determine themix of disaster risk financing instruments based on anassessment of risks, desired coverage, available budget, andcost efficiency.

Key Features

Access criteria: To access the DPF Cat DDO, the recipients
must (i) have an adequate macroeconomic policy framework;and (ii) have a satisfactory program in place to manage risks ofnatural disasters and public health emergencies. The WorldBank will monitor this program periodically. Both criteria must
be met at approval and any potential renewals. Additionally,
the effectiveness of the program for managing risks of natural
disasters and public health emergencies will be continuously
assessed throughout the implementation phase. Progress will
be measured against established results indicators and theimplementation of the reform program. Failure to maintain asatisfactory implementation of the program may result in thesuspension of drawdowns.
Country limit: The country limit is set at US$1 billion or 0.5%of GDP (whichever is less).
Drawdown trigger: The DPF Cat DDO has a pre-specified
drawdown trigger linked to a natural catastrophe, typically themember country’s declaration of a state of emergency.
Drawdown period: The three-year drawdown period may berenewed (with a fee) up to four times, for a maximum of 15
years in total.
Disbursement criteria: Once the drawdown trigger is met,
the satisfactory implementation of the reform programsupported by the DPF Cat DDO is required. The assessment ofthe macroeconomic policy framework is not needed at thetime of disbursement.
Revolving feature: The DPF Cat DDO also has an optional
revolving feature, which means that amounts repaid during
the drawdown period are available for subsequent
withdrawal.
Repayment schedule: The repayment schedule for the DPF
Cat DDO is defined at the time of withdrawal, and compliancewith the policy limit of 35 years final maturity and 20 years
Average Repayment Maturity (ARM) is also evaluated from thewithdrawal date. For some projects addressing Global
Challenges with Cross Border Externalities, the maximum loan
maturity is extended to up to 50 years and the ARM up to 25years.
Scale-up Options: An existing DPF Cat DDO can be scaled up
with new financing (the Scalable DPF) to allow an increase indisbursements of up to 100 percent of the parent DPF Cat DDO
financing amount. A request for a Scalable DPF is subject to (i)compliance with the disbursement conditions for the parent
DPF Cat DDO; (ii) due consideration of the availability of IBRD
resources and prudential limits; and (iii) an assessment that
additional funds needed for disaster response. This additional
funding is intended to bridge the gap in situations where theamount available for drawdown in the parent Cat DDO may be

Blend countries also have access to the IDA Cat DDO (refer to termsin IDA CAT-DDO.pdf)

1

IBRD Catastrophe Deferred Drawdown Option (Cat DDO)

Updated as of July 2024

PRODUCT NOTE
small relative to the expected costs associated with thedisaster response. An existing DPF Cat DDO may be topped up
with up to 10 percent of undisbursed balances across thecountry’s Bank portfolio of Investment Project Financing andProgram for Results operations, under the Rapid Response
Option (RRO). When the RRO is linked to a DPF Cat DDO, its
disbursement conditions are the same as those of the existing
DPF Cat DDO.

Pricing

The DPF Cat DDO provides an affordable source of contingent
financing for governments to finance recurrent losses caused
by a natural catastrophe, including natural disasters and publichealth emergencies due to a biological event. It has a variableinterest rate (market-based reference rate plus a variablespread) that is charged on disbursed and outstanding
amounts. Disbursement pricing is determined based on theIBRD pricing policies effective on the date of withdrawal. DPF

Cat DDOs are currently priced at the spread over the reference
rate for IBRD loans, comprising the contractual spread,funding cost and maturity premium.
The calculation of the ARM begins at loan effectiveness for thedetermination of the applicable maturity premium but atwithdrawal for the remaining component. As such, the total
spread will be different for each separate disbursement.
In addition, there is a front-end fee of 0.50% on the loan
amount and a renewal fee of 0.25% on the undisbursed
amount.
The pricing for the Scalable DPF follows regular DPF pricing.
There is no additional cost for using the RRO.
For current pricing information, please visit the Treasury
website:http://treasury.worldbank.org/en/about/unit/treasury/ibrdfinancial-products

Major Terms & Conditions
Eligibility

All IBRD-eligible borrowers — including Blend countries — are eligible upon meeting approval criteria.

Approval
Criteria

The existence of an adequate macroeconomic policy framework and a satisfactory disaster risk management
program, including results indicators defined for implementation of the Program that addresses naturaldisasters, which may include health-related events, are required for approval.

Currency

EUR, JPY, USD, and GBPDrawdown

Up to the full loan amount is available for disbursement when a natural catastrophe, including a natural
disaster and a public health emergency due to a biological event, occurs and when the pre-defined trigger
condition is met at any time prior to the loan closing date. Eligibility for drawdown also requires satisfactory
implementation of the reform program. The drawdown period may be renewed up to a maximum of fourtimes, for a maximum of 15 years in total.

Repayment
Terms

Repayment terms are applicable from the time of drawdown. They must be determined upon commitment
and may be modified upon drawdown within prevailing maturity policy limits.

Lending Rate

As in all IFLs, the lending rate consists of a variable market-based reference rate plus a variable spread. The
lending rate is reset semi-annually on each interest payment date and applies to interest periods beginningon those dates.

Lending RateSpread

The spread is variable and consists of IBRD's average cost margin on related funding relative to the applicablereference rate plus IBRD’s contractual spread of 0.50% and a maturity premium for loans with average
maturities greater than 8 years. The spread is recalculated quarterly and is applicable to all interest rate reset
dates on or after each recalculation date.
The calculation of the average maturity of DDOs begins at loan effectiveness for the determination of theapplicable maturity premium, but the spread level is the IBRD applicable spread at the time of withdrawal.

Front-end Fee

0.50% of the loan amount is due within 60 days of the effectiveness date; it may be financed out of loan
proceeds.

Renewal Fee

Renewal fee is 0.25% of the undisbursed balance.

Conversion
Options

Standard IFL conversions are offered: Currency Conversions, Interest Rate Conversions, Caps, Collars,
Payment Dates, Conversion Fees.

OtherFeatures

The country limit is 0.5% of GDP or US$1 billion, whichever is less. Limits for small states are considered on acase-by-case basis.
Revolving Features (optional): Amounts repaid or prepaid by the borrower are available for drawdown,
provided that the closing date has not expired.

Contact: Miguel Navarro-Martin, Manager, Financial Products & Client Solutions, The World Bank Treasury
 mnavarromartin@worldbank.org  +1 (202) 458 4722
1225 Connecticut Avenue NW, Washington, D.C., 20433, U.S.A.

IBRD Catastrophe Deferred Drawdown Option (Cat DDO)

Updated as of July 2024