Lassa fever outbreak slows, reducing risk to pandemic cat bond


According to the latest official World Health Organisation (WHO) data, the spread of the recent Lassa fever outbreak in Nigeria has slowed and as a result the number of confirmed cases has risen much more slowly in recent weeks, reducing the risk posed to investors in the World Bank’s pandemic swaps and catastrophe bonds.

Lassa fever is one of the pandemic risks covered under the terms of the Class B tranches of pandemic swaps and cat bonds issued under the PEF transaction by the World Bank’s International Bank for Reconstruction and Development (IBRD) last year.

As we reported in March, a Lassa fever outbreak in Nigeria was confirmed by the World Bank as an “Eligible Event” under the terms of the Class B pandemic swaps and pandemic catastrophe bonds, that had been issued to support the financing of the Pandemic Emergency Financing Facility (PEF).

Then, at the end of March, the number of Lassa fever confirmed deaths was seen to increase, raising the risk to the pandemic bonds and swaps.

But now, having published its latest official data on the Lassa fever outbreak in Nigeria, the WHO reports that the rate of confirmed cases and deaths has declined significantly in recent weeks.

When we last reported on this, the number of suspected cases had risen to 1495 and suspected deaths to 119, while the number confirmed is now put at 95 deaths out of 376 confirmed cases.

It is the confirmed cases that is important, as the parametric trigger for the pandemic catastrophe bond uses the confirmed deaths number from the WHO’s disease outbreak news reports.

The number of cases being reported had slowed in March, but at the time the data showed that overall the ratio of deaths reported to confirmed cases had risen slightly.

Now, the latest data releases on Friday shows suspected Lassa fever cases at 1849, the number of confirmed cases at 413 and deaths within those confirmed cases as 114.

The percentage of confirmed cases that resulted in death has actually risen slightly, but the WHO says that overall, “there has been a downward trend in the weekly reported number of Lassa fever cases with less than 20 cases reported each week in March and only five new cases reported in the week ending 15 April 2018.”

That seems promising and could mean that the pandemic cat bonds and pandemic swaps are out of the woods, however the WHO does warn, “This declining trend needs to be interpreted with caution as historical data shows that the high transmission period has not passed.”

The number of lassa fever deaths remains far below the trigger point for the pandemic cat bonds, with the Class B notes only beginning to payout once there are 250 WHO confirmed deaths from the outbreak, which would result in a 15% payout of the principal from the tranche.

With the outlook perhaps looking brighter for this Lassa fever outbreak coming under control it is probably too early for the cat bond to be considered totally safe though, especially as the rate of deaths to confirmed cases remains high in this outbreak.

As a result, the World Bank will continue to monitor developments in Nigeria closely, as will the investors in the pandemic cat bond and swaps.

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