Hurricane Melissa made landfall in south-western Jamaica on 28 October 2025 as a Category 5 hurricane, with maximum sustained winds of about 185 miles per hour, among the strongest Atlantic landfalls on record. By the evening of 28 October, more than 77% of customers of Jamaica Public Service, the island's electricity utility, were without power, according to the Jamaica Observer. The following day the newspaper reported that more than 500,000 JPS customers had lost supply.
On 7 November the World Bank announced that Melissa had met the pre-agreed parametric triggers of Jamaica's catastrophe bond, qualifying for a full payout of $150 million to the government. The analysis by the bond's calculation agent, AIR Worldwide, was based on the storm's central pressure and path as reported by US hurricane forecasters.
Damage to the power system
Jamaica's grid is built largely overhead, with transmission and distribution lines on poles exposed to wind and falling trees. A storm of Melissa's strength causes damage across generation, transmission and distribution. Reports in the days after landfall described extensive destruction to poles and lines, particularly in the western parishes where the eye passed, and restoration crews prioritised hospitals and water pumping stations.
Before the storm, Jamaica's Office of Utilities Regulation allowed JPS to draw US$5 million from its Electricity Disaster Fund, a customer-funded reserve, for hurricane preparations. The scale of the damage means restoration will take weeks in many areas and months in the hardest-hit parishes.
How the catastrophe bond works
A catastrophe bond transfers disaster risk from a government or company to investors. Investors buy bonds that pay interest, and if a specified disaster occurs, they lose some or all of their principal, which is paid to the protected party. Parametric bonds pay out based on measurable characteristics of the event, such as a hurricane's central pressure within a defined area, rather than on assessed losses. That allows fast payment, typically within weeks.
Jamaica first obtained catastrophe bond coverage from the World Bank in 2021 and renewed it in 2024. The World Bank said Jamaica has a well-developed disaster risk financing strategy, combining the catastrophe bond with other instruments such as contingent credit and regional insurance through the Caribbean Catastrophe Risk Insurance Facility.
The $150 million payout goes to the government for national recovery and is not specifically earmarked for the electricity sector. It will be a small share of the total cost of the disaster, but it provides immediate liquidity at a time when the government faces large demands for relief and reconstruction.
Climate conditions
Melissa intensified rapidly over very warm waters in the Caribbean Sea in the days before landfall. Rapid intensification, in which a storm's maximum winds increase by large amounts within 24 hours, has been observed more frequently in recent years, and research has linked it to higher ocean heat content. For island grids, rapid intensification shortens the time available to prepare.
Energy security on small islands
Small island power systems such as Jamaica's depend heavily on imported fuel. Jamaica generates much of its electricity from LNG and heavy fuel oil, along with wind, solar and hydro. Fuel import terminals and power plants located on the coast are exposed to storm surge and wind damage, and fuel supply chains can be disrupted after a storm.
Distributed generation, particularly rooftop solar with batteries, can help households and critical facilities maintain power when the grid is down. After hurricanes Irma and Maria in 2017, Puerto Rico and several Caribbean islands accelerated programmes to install solar and storage at hospitals, shelters and water facilities. Such systems are not immune to damage, but they can be restored faster than long transmission lines.
The economics of restoration
Restoring an island grid after a Category 5 storm is constrained by materials and labour as much as by money. Poles, conductors, transformers and switchgear must be shipped in, and utilities rely on mutual assistance crews from other utilities in the region and from North America. Large transformers can have long manufacturing lead times, which is why utilities in hurricane zones keep strategic spares. The sequence of restoration usually starts with generation and transmission, then main distribution feeders serving hospitals, water systems and commercial centres, and finally individual neighbourhood lines.
The cost of restoration ultimately falls on customers, taxpayers or donors. In Jamaica, the regulator will need to decide how much of JPS's restoration cost can be recovered through tariffs, and over what period, while the government weighs how much public money to direct to the grid. Those decisions affect electricity prices on an island where tariffs are already high by international standards, largely because of fuel import costs.
Insurance and rebuilding
Rebuilding the grid to higher standards, including stronger poles, undergrounding in critical areas and microgrids, would reduce vulnerability to future storms but adds cost. Utilities in the Caribbean typically have limited access to insurance for transmission and distribution lines, which are expensive to cover. Governments and development banks have explored dedicated resilience funds and contingent financing for utilities.
The full payout of the catastrophe bond is likely to be studied by other governments and by the bond market. It is one of the largest parametric payouts to a sovereign, and it demonstrates both the speed of such instruments and the importance of trigger design. Investors in the bond lose their principal, which is the risk they accepted in exchange for the interest they received.
Regional implications
Melissa also caused damage in Haiti, Cuba and other parts of the Caribbean. For regional energy markets, the most direct effect is on fuel demand and supply logistics in affected islands. For global markets, the storm passed well south of US Gulf Coast oil and gas infrastructure and did not affect refining or LNG exports.
The 2025 Atlantic season had been relatively quiet for the United States, with no hurricane making landfall on the US mainland. That pattern helped keep global insured losses for the year below the levels of a peak year, even as island nations like Jamaica suffered severe damage.
What to watch
Key developments include the pace of power restoration across Jamaica's parishes, government financing for reconstruction, including any additional support from the World Bank, the Inter-American Development Bank and the Caribbean Development Bank, and decisions on how to rebuild the grid. The 2026 catastrophe bond market will show whether Melissa affects pricing for Caribbean sovereign risk.