Munich Re, Swiss Re and catastrophe modeling firm AIR Worldwide collaborated on the recent World Bank launch of a $500 million insurance fund designed to help protect poor countries from pandemic risk.
The new Pandemic Emergency Financing Facility (PEF) includes an insurance window combining funding from the reinsurance markets with proceeds of World-Bank issued pandemic (catastrophe) bonds, as well as a complementary cash window. If an outbreak happens, the PEF would quickly release funds to qualified international responding agencies and countries.
World Bank officials announced the new Pandemic Emergency Financing Facility (PEF) on May 21; Japan has committed $50 million in initial funding toward the initiative.
Officials disclosed the new fund in advance of the May 26-27 Summit of Group of Seven Leaders in Ise-Shima, Japan. It comes a year after G7 leaders advocated its development in May 2015, during the G7 summit in Schloss-Elmau, Germany.
In a world that has dealt with pandemics in recent years such as the Ebola crisis in Guinea, Liberia and Sierra Lone, the facility is designed to quicken global and national responses to outbreaks that could become the next big global pandemic. The World Bank said it developed the PEF along with public/private sector partners, as well as collaboration with Munich Re, Swiss Re and the Verisk Analytics-owned AIR Worldwide.
The World Bank told Carrier Management that its treasury arm retained Swiss Re and Munich Re as arrangers of the transaction, who “will play a role in helping structure the different layers of risk and to place the PEF with risk takers.” As well, product pricing and placement will be open and driven by book building and competitive processes, the World Bank noted.
Additionally, the World Bank has been talking with a number of insurance agencies in Japan and other places as it gears up to place the PEF on the marketplace.
Plans call for the PEF insurance window to provide up to $500 million for an initial 3 years for infectious diseases likely to cause major epidemics, including influenza pandemic viruses, SARS, MERS, Ebola, and other diseases such as Crimean Congo and Lassa fever.
When would the money be released? It would depend on the size, severity and spread of the outbreak, and parametric triggers designed with public data would shape those decisions.
According to the World Bank, the annual global cost of pandemics that are moderately severe to severe averages $570 billion. Should a severe pandemic hit (think the 1918 Spanish flu), the cost could hit nearly $4 trillion, or 5 percent of global GDP.
Source: The World Bank Group