Climate change will exacerbate pandemics, risk transfer a must: Report

by Artemis on June 10, 2016

Climate change impacts will directly and indirectly exacerbate the frequency and intensity of pandemic outbreaks, according to research, emphasising the importance of the Pandemic Emergency Financing Facility (PEF), reinsurance and other risk transfer solutions.

A group of students from John Hopkins’ School of Advanced International Studies (SAIS) have collaborated with from reinsurance giant Swiss Re to examine the potential impact climate change could have on the outbreak of infectious diseases across the globe.

“Climate change is a threat multiplier that can increase the exposure to vectors and vulnerability before a pandemic outbreak, and also exacerbate the severity of an outbreak,” says the report.

The report explains that prior to a pandemic outbreak climate change can drive changes in temperature, disrupt precipitation patterns, among other factors, that in turn can result in changes to migration patterns and the habitat of certain insects and animals, including those that spread infectious disease.

“Climate change will affect the environment, animals, insects, and human populations through various channels, increasing exposure and sensitivity to infectious diseases before and during a pandemic outbreak,” explains the report.

A good example of this explains the study is with mosquitos, which carry a range of infectious diseases that can quickly turn into a pandemic event. Mosquitos “will likely expand in regions where climate change will create a more favourable environment for them to live in. Their population will also grow more rapidly during their most active seasons, and will survive for longer periods of time.”

The reality is that it’s very difficult to predict when and where the next pandemic outbreak is going to happen. Combined with the inherent uncertainties surrounding the impacts of climate change across the globe, the need for preparedness becomes apparent.

The report highlights the recent announcement from the World Bank of the establishment of the Pandemic Emergency Financing Facility (PEF). The world’s first insurance market for pandemic risk that will utilise reinsurance and insurance-linked securities (ILS) mechanisms such as pandemic catastrophe bonds, to rapidly disburse capital in the event of deadly pandemics.

While this is certainly a step in the right direction and will hopefully, overtime, reduce the cost of pandemic outbreaks on global economies and governments, and also improve global resilience by improving preparedness and awareness of outbreaks, the impact of climate change emphasises the need for such a global fund and other risk transfer solutions.

Climate change and pandemic risks by themselves are huge, complicated and unpredictable issues that require sophisticated mechanisms and structures to improve resilience and financing.

“When a number of climatic factors are combined with other non-climatic trends, such as urbanization, changes in land-use and livestock, potentially dangerous synergies will be created.

“Unfortunately, however, it is extremely difficult to predict the precise location and timing of the next emergence or re-emergence of an infectious disease strain. Thus, in addition to efforts to enhance health infrastructure and preparedness, robust response mechanisms need to be in place. Both global and national response mechanisms and funding are crucially necessary,” says the report.

That climate change will likely exacerbate future pandemic outbreaks, according to the report which can be read in full here, really amplifies the necessity of reinsurance funds and risk transfer solutions, such as the PEF and the African Risk Capacity (ARC), at both an international and local level.

It also amplifies the need for risk capital to be efficient for pandemic exposures, making the capital market solutions of pandemic cat bonds a valuable addition to traditional risk transfer sources, such as insurance and reinsurance.

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