Hurricane Melissa, the most powerful Atlantic hurricane of the year, made landfall this week as a Category 5 storm in Jamaica. The strength of the storm means it will likely trigger a full payout from a catastrophe bond designed to provide funds to the island in the event of catastrophic weather events.

The $150 million catastrophe bond, structured by Aonis intended to help the island’s people rebuild after natural disasters by providing Jamaica parametric coverage against losses from named storms. The policy took effect this year and lasts through 2027.

The government of Jamaica is the first government in the Caribbean region, and the first of any small island state, to independently sponsor a cat bond, according to Aon. Its likely payout demonstrates the value of a unique type of backstop funded by the private markets.

In order to trigger the full payment, the storm has to meet a particular strength criteria. The central pressure of the storm must be at or below 900 millibars as its makes landfall and crosses the island nation.

Early data from the National Hurricane Center shows Hurricane Melissa’s pressure stayed below 900 millibars in several areas. Those readings are in the process of being verified by an independent calculation agent.

“While the final numbers are still being verified, the early signs suggest the transaction is doing what it was designed to do: getting critical funds to the country quickly after a major disaster,” Chris Lefferdink, Aon’s head of insurance-linked securities for North America, said in a statement.

The review process typically takes 2 to 3 weeks, and the earliest possible payout to Jamaica could come in approximately 1 month, according to a spokesperson from Aon.

Previous parametric transactions payouts have taken 3 months or more, but for this event Aon used an innovative data source to enable faster payments.

The catastrophe bond was placed using the International Bank for Reconstruction and Development’s “capital at risk” program, which is used to transfer the risks associated with natural catastrophes to the capital markets, allowing the country to access funds quickly after a major event.

“What you have is a capital provider putting funds in the pool, an insurer putting the coupon for those funds in the pool (and) if the storm hits that criteria, they get the money in a much quicker fashion,” Aon CFO Edmund Reese told CNBC’s Contessa Brewer in an interview.

Catastrophe bond and insurance-linked securities were created in the mid 1990s in the wake of Hurricane Andrew’s destruction. They’ve since grown in popularity, with the cat bond market growing by over 50% since the end of 2022 to nearly $55 billion.

“Public-private partnerships like Jamaica’s continue to highlight how parametric insurance can deliver rapid, transparent relief in the wake of severe storms,” Lefferdink said.

Jamaica very narrowly missed the requirements necessary to receive a payout from a separate cat bond when Hurricane Beryl battered the island in 2024, resulting in $995 million in damages to homes, crops and infrastructure, according to the National Hurricane Center.