Diseases such as Ebola, Zika, and AIDS have long sent shivers down the spines of people around the world thanks to their virulence and capacity for contamination. Many popular television shows and movies have pondered the potential social consequences of such an outbreak, but few think about the potential financial consequences of these illnesses.
In reality, pandemics could cripple local economies, national economies, and even disrupt global commerce. Given its mission to help prevent poverty around the world, the World Bank sees the gap in nation-level insurance as a huge potential liability that the world cannot afford. To that end, the World Bank has shifted from its normal role as lender to insurer.
The World Bank announced its Pandemic Emergency Financing Facility (PEF) during the G7 ministers meeting in Japan. The Facility will make funds instantly available to help prevent the spread of infectious diseases, thus saving lives and money.
As Jim Young Kim, head of the World Bank and an epidemiologist, describes it, “We can’t change the speed of a hurricane or the magnitude of an earthquake, but we can change the trajectory of an outbreak…With enough money sent to the right place at the right time, we can save lives and protect economies.”
Ebola was once a huge problem across Africa. It was eventually contained, but that came at a very high economic cost. Out of the 28,000 people that were infected, 11,000 died in countries like Guinea, Liberia, and Sierra Leone. Donors spent an estimated $7 billion fighting the infections, with the first $100 million of that not actually used until October 2014 after more than 5,000 people had already died.
The Bank contends that such a situation is needless, and an enormous waste of life and resources. Had an insurance fund existed, those initial funds could have been delivered for use months earlier, potentially saving hundreds or even thousands of lives and an enormous amount of money.
In fact, according to the World Bank’s own studies, had the insurance funds been available and delivered at the beginning of the outbreak, the world might have spent a mere 4% of what it ultimately contributed (just $200-$300 million as opposed to $7 billion).
The PEF financing structure is exceptionally complicated, taking some 18 months to put together, and is funded through a combination of direct contributions, bond sales, and reinsurance. It will automatically pay funds to nations and health agencies combatting infectious diseases once the number of infected, the number of fatalities, or the number of nations dealing with infections reaches certain predetermined thresholds.
The Director of Global Health Policy at the Center for Global Development, Amanda Glassman, described the PEF as plugging an important hole that the World Health Organization has struggled with for years: how to raise contingency funds to deal with a pandemic before it escalates out of control.