Recent analysis from the World Bank suggests that the annual global cost of moderately severe to severe pandemics is roughly USD 570 billion, or 0.7% of global GDP; a very severe pandemic like the 1918 Spanish flu could cost as much as 5% of global GDP, or nearly USD 4 trillion.
The 2013-16 Ebola crisis demonstrated that the world is not prepared to handle a major disease outbreak. To prevent a future outbreak from becoming a costly global pandemic, society needs to quickly mobilize funds to assist countries and health agencies, save more lives, and prevent economies from crumbling. In May of 2016, the World Bank helped fill this gap by launching the Pandemic Emergency Financing Facility (PEF) at the G7 Ministers of Finance Meeting in Japan.
Here is what you need to know about the Pandemic Emergency Facility:
1. PEF creates the first pandemic insurance market
The establishment of PEF, an insurance plan, is the first insurance market to cover pandemic risk. Countries covered under PEF will be protected against certain types of viruses that lead to severe outbreaks. If an outbreak meets predetermined measures based on severity, speed, and size, funding will be disbursed to lessen the effects of the outbreak.
2. Funded through two financing mechanisms
The facility will be funded through two methods: cash and insurance. First, funds will be disbursed from a cash reserve formed by wealthy countries, capital markets, and the reinsurance industry. This method will allow more flexibility in funding to quickly cover immediate needs that may not meet the activation measures for the second method. The second method is a parametric insurance trigger that must meet specific criteria, such as number of cases or outbreak growth rate. Through these mechanisms, we no longer will need to rely on inevitably slow political deliberations that withhold funding for long periods of time.
3. Global coverage
PEF is the first type of insurance that is global in nature, expanding coverage for health risks in emerging markets. It will provide coverage to all 77 countries eligible for loans from the International Development Association, part of the World Bank that helps the world’s poorest countries. PEF will also supply funding to qualified international response organizations.
4. Diseases and activities covered under PEF
PEF covers new influenza pandemic virus A, B, and C, SARS, MERS, Ebola, Margburg hemorrhagic fever, Crimean Congo hemorrhagic fever, Rift Valley fever, and Lassa fever.
5. International institutions that played a role in the development of PEF
The World Bank initiated PEF in collaboration with AIR Worldwide, Swiss Re, Munich Re, and the World Health Organization, along with several other public and private organizations.
While we can’t stop mother nature from developing hurricanes or winter storms, the world can pool its resources together to develop a more efficient crisis management response that can respond quicker and smarter, and most importantly, save lives.
See AIR’s presentation Going Viral: Preparing for the Next Pandemic