Reinsurance industry helps World Bank launch ‘pandemic bond’ to tackle major outbreaks
The global reinsurance industry has collaborated with and assisted the World Bank’s launch of specialist bonds to support the $500 million Pandemic Emergency Financing Facility (PEF), which is designed to rapidly disburse funds to eligible countries facing a major disease outbreak.
The World Bank in response to the high financial, social and economic loss driven by outbreaks of infectious disease, such as the 2014 Ebola outbreak in West Africa, the PEF was announced in 2016 by the World Bank as a facility designed to channel funding to member countries of the International Development Association (IDA) facing a major disease outbreak.
The World Bank has now announced that with the help of the global reinsurance industry and the broader risk transfer markets it has launched specialist bonds, also known as catastrophe bonds, designed to provide financial support to the PEF.
The facility will provide over $500 million of cover to IDA countries against the risk of pandemic outbreaks over a period of five years, and is the first time World Bank bonds are being utilized to finance efforts against infectious disease outbreaks.
Launched in May 2016 at the G7 Finance Ministers and Central Governors meeting in Sendai, Japan, the financing structure works through a combination of bonds and derivatives, a cash window, and “future commitments from donor countries for additional coverage,” explains the World Bank.
Furthermore, pandemics are among the most likely uninsured risks around the world to take place, with the annual cost of moderately severe to severe pandemics at an estimated $570 billion, according to data from the World Bank.
The PEF is designed to cover six viruses that are the most likely to result in a pandemic. The World Bank explains that this includes new Orthomyxoviruses (new influenza pandemic virus A), Coronaviridae (SARS, MERS), Filoviridae (Ebola, Marburg) and other zoonotic diseases (Crimean Congo, Rift Valley, Lassa fever).
When an outbreak reaches predefined levels of contagion, which is linked to the number of deaths, the speed the disease spreads, and if the disease crosses international borders, PEF financing for eligible countries is triggered, and funds are disbursed rapidly.
