The pandemic catastrophe bonds and pandemic risk-linked swaps issued by the World Bank have now been triggered by the COVID-19 coronavirus outbreak and will pay out USD 195.84 million, as first reported by our sister publication Artemis.
Issued in July 2017 to provide financial backing and insurance protection to the World Bank’s Pandemic Emergency Financing Facility (PEF), the pandemic catastrophe bonds provide protection linked to the occurrence of specific pandemics.
As the COVID-19 coronavirus pandemic continued to spread across the world and impact more and more individuals in numerous countries, the potential for the cat bonds and pandemic risk-linked swaps that were issued simultaneously to pay out has been a hot topic.
Artemis, our insurance-linked securities (ILS) focused sister publication, explained previously that many of the data points required to trigger the financial instruments had been more than exceeded from the global impact of the COVID-19 pandemic.
Now, Artemis has learned that the final trigger input, which was the growth rate factor, has now turned positive as of March 31st, 2020, resulting in a pay out of USD 195.84 million across the pandemic catastrophe bonds and also the pandemic swaps.
The capital will be made available in the coming weeks to fund the PEF to support countries within the International Development Association (IDA) respond to the ongoing pandemic. IDA countries are defined as those with low per capita incomes that lack the financial ability to lend from the International Bank for Reconstruction and Development (IBRD) – the global debt facility the bonds were issued through.
So, while discussion around the effectiveness of the World Bank’s pandemic bonds, and specifically the trigger structure, will likely continue, the hope now is that the funds from the capital markets and the reinsurance sector will reach those in need as quickly as possible to support recovery.
