A severe pandemic would harm health, economies, and communities in all countries, but especially in poor and fragile states. Pandemic prevention requires robust public health systems (veterinary and human) that collaborate to stop contagion promptly.
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What is the Pandemic Emergency Facility?The World Bank Group (WBG) is working with WHO and other partners, including the private sector, to develop and implement a new Pandemic Emergency Financing Fac... Show More +ility (PEF). The PEF is a global financing facility that would channel funds swiftly to governments, multilateral agencies, NGOs and others to finance efforts to contain dangerous epidemic outbreaks before they turn into pandemics. The PEF is being designed flexibly so that it can function effectively within the evolving new global health architecture. Financing from the PEF will be linked to strong country-level epidemic and pandemic emergency preparedness plans, thereby incentivizing recipient governments and the international community to introduce greater rigor and discipline into crisis preparedness and reduce the potential for moral hazard.Why do we need a Pandemic Emergency Facility?The Ebola crisis and other similar crises point to the need for prevention, preparedness, early detection and timely support to help countries deal with infectious disease outbreaks. Financing for a pandemic emergency is essential—to ensure that the right amount of money is available at the right time, minimize the human and economic impacts, and spur better preparedness. The better prepared, the faster and less expensive our response. In a world of scarce resources and fast-moving, unpredictable crises, the traditional approach of mobilizing resources in the wake of an outbreak is slow, inefficient and fragmented.How big is the economic risk of a pandemic? According to a 2013 survey by Towers Watson of 30,000 insurance industry experts around the world, pandemics topped the list of extreme risks that matter most for the insurance industry over the long term. The World Bank Group released a report in April 2015 showing that the Ebola epidemic continues to cripple the economies of the three hardest-hit countries—with a projected $2.2 billion in lost GDP for 2015. Estimated economic losses for 2015 across sub-Saharan Africa range from at least $500 million to as high as $6 billion if the epidemic were to spread further through the region.Ebola isn’t our first wake-up call that pandemics are costly. From 1997-2009, six major outbreaks of highly fatal zoonoses—animal-borne diseases that can be transmitted to humans, such as Ebola, SARS, avian and H1N1 flu—caused an estimated $80 billion in economic losses. The human and social costs are incalculable. Many pathogens are even more infectious than Ebola.What activities would the PEF finance?The PEF is expected to cover a range of response activities such as: (i) rapid deployment of a trained and ready health work force (“global health corps” or ‘white coats”); (ii) medical equipment, pharmaceuticals and diagnostic supplies; (iii) logistics and food supplies; and (iv) coordination and communication. The PEF would not cover pandemic preparedness or reconstruction efforts. These would need to be financed through existing channels, domestic resources, bilateral development assistance, and multilateral financing, including IDA, the World Bank Group’s fund for the poorest countries, and IBRD loans for middle-income countries.Who would receive the money disbursed by the PEF?The PEF is envisaged as an open platform that would make finance available not for the World Bank Group itself, but directly to eligible, affected countries or international organizations such as the World Health Organization and other partners that could help contain the outbreak. Both low and middle income countries would be eligible to receive funds, provided they prepare an appropriate disease risk management plan.How would the PEF work with existing WBG financing instruments?The PEF would build on existing WBG financing instruments, including the IDA Crisis Response Window and the CAT DDO (catastrophe deferred drawdown option). The IDA CRW provides urgent financing to help the poorest countries to respond to crises. A total of $1 billion is available for all 77 poorest countries through June 2017. The WBG has already committed more than half the total amount to help countries deal with the Ebola crisis just 6 months into IDA17. The CAT DDO provides a line of credit that allows middle-income countries to access immediate financing following a natural disaster. To access the funds, countries have to develop a disaster risk management program to demonstrate that they have taken the necessary steps.The pandemic facility is complemented by the Ebola Recovery and Reconstruction Trust Fund. The WBG established this fund in September 2014 to complement financing for Ebola emergency response efforts and help affected countries address the social and economic impacts and pave the way for recovery. The fund is focused on activities such as restarting agricultural production; getting children back in school and learning; and expanding cash transfer and work-for-food programs to help those who have lost their incomes.What role would the World Bank Group, WHO and other international institutions play in the PEF?The World Bank Group (WBG) is playing a lead role in conceptualizing the facility, working in coordination with international organizations, including the WHO, the private sector and other development partners. The WBG supports a strong WHO and the efforts underway to ensure WHO is adequately financed and equipped to respond to pandemics. The PEF will provide additional and complementary financing tools needed to ensure a swift and comprehensive response. Funds from the PEF would be channeled via international organizations, including the WHO and other UN agencies, governments, NGOs, etc. to finance efforts to contain dangerous epidemic outbreaks before they turn into pandemics.What role could the private sector play?Private sector participation in the PEF will be essential to ensuring that the response to future pandemics is timely and effective. The private sector could be involved in a variety of activities, including developing insurance against pandemic threats, training healthcare workers, and playing an active role in coordinating the humanitarian response to crises. The private sector could also play a role in preparing communities for future outbreaks.What products could the PEF offer?The PEF’s design builds on the existing suite of crisis response tools, within and outside the WBG, and on the WBG’s experience in kick-starting market mechanisms, and could offer a variety of complementary products:Private insurance mechanism. The PEF, on behalf of countries, could buy insurance coverage from the private sector to cover risks associated with the outbreak.Public funding mechanism. The PEF would rely on long-term donor pledges to IBRD, which could, through bonds or the Bank’s liquidity, be disbursed to contain the outbreak.How would the PEF insurance mechanism work?The PEF would purchase insurance coverage from the private sector on behalf of developing countries to cover costs associated with disease outbreak response. When a pre-agreed parametric trigger (based on public and observable data) is activated, the private sector would make the agreed payouts to the PEF, which would disburse resources to eligible implementing partners to finance critical containment measures. Such a mechanism would be able to disburse resources quickly once the trigger is activated, rather than relying on a loss assessment, which typically takes time. The insurance mechanism would need to start small but could be expanded in terms of geography, size, events covered, etc., as the market for pandemic/epidemic risks in developing countries develops.How would the insurance mechanism be funded?The leading options to finance the insurance mechanism are through bond markets and insurance companies. These can be very easily combined in a manner to lower the overall cost of premium; this is very frequently done in the private sector to optimize costs and coverage. In both options, the insurance premium would need to be funded largely by donors, but potential beneficiaries may also contribute.What are the key benefits that the insurance mechanism would bring?The insurance mechanism would help create a new market for insuring epidemic and pandemic risk. This would help bring market discipline to crisis response by creating positive incentives for data reporting and monitoring of diseases and for country-level investments in preparedness to tackle pandemics. One idea that is being explored in this context is whether the level of premiums could be linked to country preparedness as measured against the benchmarks set by WHO’s International Health Regulations.Are there other, similar, insurance mechanisms?The underlying concept of using insurance to pre-finance sovereign risks is well-recognized, and has been employed in the management of climate and disaster risks faced by governments. Programs such as Mexico's MultiCat (for earthquake and hurricane), African Risk Capacity (for drought) and the Caribbean Catastrophe Risk Insurance Facility (for earthquake, droughts and extreme rainfall) have been well-studied and are considered successes by multilaterals, donors, beneficiary governments and rating agencies.How would the public funding mechanism complement the insurance mechanism?To enable the PEF to cover higher frequency events, the WBG is also working with partners on other instruments, including a public funding mechanism, to complement the insurance mechanism. With the public funding mechanism, the WBG could take long-term donor pledges/lines of credit and use its own liquidity or borrow on the capital markets against these pledges once an outbreak happens.What are the next steps needed to further develop the PEF?The WBG is currently in discussions with international organizations, including the WHO, governments, potential donors, the private sector, and other development partners to flesh out the design of this proposed facility so that when the next global health emergency is declared, the world has the resources to quickly deploy the financial resources, trained health workers, equipment, medicines and whatever else is required. Show Less -