pandemic

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.

The World Bank has launched the “first-ever insurance market for pandemic risk”, the Pandemic Emergency Financing Facility (PEF), which is designed to rapidly disburse capital in the event of deadly pandemics and will be backed by pandemic catastrophe bonds and reinsurance.

Global reinsurance firm Swiss Re has continued its trend of redeeming its series of Vita Capital mortality linked catastrophe bonds, with its $275m 2012 transaction Vita Capital V Ltd. called a year early and investors to be paid a premium of 1%.

An innovative new pandemic business interruption insurance product launched by insurance and reinsurance group AXIS, provides a very good example of how pandemic risk transfer could be structured in a manner suitable for the ILS market and its investors.

The outbreak of infectious disease poses a very real and serious threat to global financial stability, with a new report claiming that yearly expected losses from potential pandemic risks top $60 billion, underlining the need for greater involvement from the entire risk transfer landscape.

The African Risk Capacity (ARC) has enlarged its risk pool, adding five new countries to those protected by the parametric insurer, growing the risk pool to $192m of capacity and utilising $70m of global reinsurance cover, which includes some ILS or collateralised protection.

San Francisco based Metabiota, a company focused on risk analytics for epidemic, is working with reinsurance and insurance companies to create risk transfer and financing solutions that can provide epidemic or outbreak insurance.

The World Bank has significantly expanded the range of disaster risk transfer, management and financing options it offers to clients, adding coverage for risks outside of pure natural catastrophe events and also insurance or reinsurance options.

The World Bank Group is actively working on the development of a concept for a pandemic risk financing facility that will be designed to enable rapid payouts of funds to countries in need of financial support when pandemics hit.

The latest in our series of interviews features Dr Simon Young, CEO of African Risk Capacity Insurance Company Ltd (ARC Ltd), a catastrophe risk pooling insurer for African states established under the umbrella of the African Risk Capacity (ARC) Specialised Agency of the African Union (AU).