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 form the facility will take is as yet unknown, and could likely range from a full insurance product, perhaps with risk pooling and access to reinsurance markets, to a deferred draw-down option product similar to the World Bank’s Catastrophe DDO, or even perhaps a pandemic catastrophe bond structure using the Bank’s own treasury capital at risk notes program.
The World Bank has been discussing the potential for pandemic cat bonds as a result of the ongoing Ebola crisis in Africa, with ebola and pandemic cat bonds also becoming a topic of conversation at the recent Davos WEF meeting.
At the same time, the African Risk Capacity (ARC) is actively exploring and beginning the early stages of development for an insurance product for epidemics and pandemic outbreak in Africa, with 2017 mooted as the earliest date for the launch of any such product.
This week, World Bank Group President Jim Yong Kim, speaking at the Foreign Correspondents Club of Japan, discussed the development of a pandemic emergency financing facility, saying that a concept was under development.
It’s vital to be able to respond more quickly to the next epidemic or pandemic, such as an Ebola outbreak, Kim said, explaining; “To help do this, the World Bank Group is currently developing the concept of a pandemic emergency facility.”
“Our goal is to work with partners to create a financial instrument that rapidly disburses a large amount of funds within eight hours, not eight months, of an outbreak that meets certain objective criteria,” Kim continued.
The way the World Bank approaches developing these contingent risk financing facilities is typically based on the best use of capital to provide the liquidity required, so it is by no means guaranteed to emerge as an insurance or catastrophe bond type product. However the fact a facility concept is being developed does suggest that something will be made available to sovereigns at risk of pandemics in due course.
Kim went into some more detail on his expectation for such a facility and the requirement for it to support provision of medical and healthcare.
“The other main goal of a pandemic facility is to promote greater country investments in preparedness, which starts with having a strong, resilient health system. The Ebola crisis lays bare the consequences of inadequate public health capacity, from disease surveillance and laboratory analysis to frontline health services and community health workers: People die; economic growth rates decline; and countries, their neighbors, and the entire world, are put at risk. These consequences show why Japan’s recent $20 million contribution to support our Ebola recovery efforts is so important.
As we take a look at all we’ve learned from the largest Ebola outbreak in history, we can begin to piece together what a global response capacity that’s truly equal to the challenge of even the worst pandemic, might look like.
It might look like this – rapidly disbursing financial mechanisms, strong global technical coordination led by a much bolstered World Health Organization, and well-rehearsed and tightly choreographed interventions involving corps of medical professionals; logistics experts; transport, pharmaceutical and communications companies; a United Nations-wide response; and support from multilateral and private sector financial institutions.
And perhaps the most important element of preparedness is to build strong health systems in every country.
The goal of a strong health system must be to achieve universal health coverage: Everyone must have access to essential health services; and poverty must not be a litmus test to qualify for care. We know that investing in health systems is an investment in both better health and stronger economic growth. Japan has once again been the global leader in promotion of universal health coverage, and ensuring access to health care for all has been very important for both low and middle-income countries. We are proud to have such a close partnership with this country around two concepts that will hold the key to protecting millions of people and the global economy from the next pandemic – disaster risk management and universal health coverage.”
Kim said that more details on a pandemic emergency risk financing facility proposal would be provided by the World Bank in the coming months. It will be interesting to see what structure emerges.