Launching the cat bond arm of the Pandemic Emergency Financing Facility

When the Ebola disease broke out in West Africa in 2014, it took the international community several months to mobilise the resources required to provide effective support to the affected communities. To address this problem, the World Bank ( decided to set up a rapid response mechanism called the Pandemic Emergency Financing Facility (PEF) and mandated Swiss Re to help support its development.

The central goal of the PEF is to release emergency funds quickly enough to prevent a disease outbreak from turning into a fully-fledged pandemic, thus potentially saving many lives. Its innovative design combines funding from the re/insurance market (using index-based products) with the proceeds from catastrophe bonds issued by the World Bank. Swiss Re Capital Markets acted as joint structurer and sole book runner for the PEF transaction, which was completed in 2017. It is the first time ever that pandemic risk is being transferred to the capital markets to protect low-income countries.

The PEF covers six viruses and protects the world’s most vulnerable countries that are eligible for funding from the World Bank’s International Development Association. Financing is released on the basis of publicly available health data as reported by the World Health Organization (WHO). The PEF’s “insurance window” (re/insurance and cat bonds) will offer total coverage of USD 425 million for an initial period of three years. Donor contributions from the governments of Japan and Germany help finance the cost of premiums.