The 2014 Ebola crisis in West Africa highlighted the difficulty in rapidly mobilizing funding from the international community to contain a pandemic outbreak. To address this challenge, the Pandemic Emergency Financing Facility (PEF) – housed at the World Bank – was launched in 2016 to provide an additional source of financing to the world’s poorest countries when they face cross-border, large-scale outbreaks. PEF financing consists of funding provided by Australia, Germany, IDA, and Japan as well as insurance coverage provided in 2017 through catastrophe bonds issued by the World Bank and sold to capital market investors as well as insurance-linked swaps executed by the World Bank with insurance companies.
FREQUENTLY ASKED QUESTIONS ABOUT COVID-19 AND THE PEF
Q. What are the triggers for the insurance window for COVID-19?
The triggers are based on outbreak size (the number of cases of infections and fatalities), outbreak growth (over a defined time period), and outbreak spread (with two or more IBRD/IDA countries affected by the outbreak).
Q. How were the triggers established?
The triggers for the PEF Insurance Window were chosen in close coordination with the World Health Organization, based on historical data available for the diseases covered.
Q. What are the specific activation criteria for coronavirus/COVID-19?
Non-Flu activation criteria (including coronavirus) are as follows:
· The rolling (or ongoing) total case amount reaches 250 or more
· The total number of fatalities reaches 250 in IDA/IBRD countries
· At least 12 weeks have passed from the start of the outbreak
The confirmation ratio: confirmed cases as percentage of total cases must exceed 20%
Cross-border spread: the outbreak needs to be in more than one country, each having had 20 or more fatalities
Positive growth rate: the total number of cases in IDA/IBRD countries must be growing at an exponential rate as confirmed by the third-party calculation agent (AIR Worldwide).
Q: When was the growth condition for COVID-19 first satisfied?
The growth condition was first satisfied on March 31, 2020. The growth condition is calculated by AIR Worldwide Corporation, an independent calculation agent, for each week, based on WHO data from that week and the immediately following week, and announced in an AIR report that is released three days after the end of that two-week period. In the case of the trigger, the relevant two-week period was March 31 to April 13, and the report was dated April 16.
Q: How early in the COVID-19 pandemic has the insurance window triggered?
At the time all trigger conditions were met, 4,653 cases, or 0.62% of reported COVID-19 cases globally, were from the world’s poorest countries that are members of the World Bank’s International Development Association (IDA).
Q. What is the maximum insurance payout for COVID-19?
The maximum payout for coronavirus is US$195.84 million.
Q: How much in premiums will the donors have paid for the insurance window when it matures in July 2020?
A: Assuming no other events occur, donors will have paid US$107.2 million in premiums while the insurance window paid out US$195.84 for COVID-19.
Q: How many countries will receive funding allocations from the PEF insurance window for COVID-19 response?
The PEF Steering Body allocated the entire amount of US$195.84 million to 64 of the world’s lowest income countries that are members of the World Bank’s International Development Association with reported cases of COVID-19 (as on April 22, 2020). Specific funding allocations were determined by population size and reported cases, with a minimum of US$1 million and maximum of US$15 million going to each country, and a heavier weight given to countries classified as fragile or conflict-affected.
Q: What’s the timeline for these countries to receive PEF funds?
Financial disbursements from the PEF begin as governments from each of the receiving countries submit authorized funding allocation requests.
Q. Do countries or responding agencies need to repay the funds?
No. The funds are grants and do not need to be repaid.
Q. How can a International organizations and NGOs receive money from the PEF?
International organizations and NGOs can become PEF-accredited responding agencies. The following are currently accredited: WHO, UNICEF, UNFPA, FAO, WFP and IFRC. The World Bank (IBRD and IDA) are also accredited. Receiving countries can determine to allocate a portion or all of their funds to a responding agency to support the country’s COVID-19 response activities.
Q: Have responding agencies ever received funds from the PEF?
The PEF cash window has been triggered three times, for the 9th and 10th Ebola outbreaks in the DRC providing $61.4 million to fight the outbreaks ($11.4m in 2018 for the 9th outbreak and $50m in 2019 for the 10th outbreak). In all instances, and upon request from the DRC government, the funds were transferred directly from PEF to WHO and UNICEF to support the Ebola response.
Q. What can PEF funds be used for?
PEF funds can be used to finance response efforts during COVID-19. This includes, but is not limited to, supporting front line health workers, drugs and medicines, essential and critical lifesaving medical equipment (including personal protective equipment), logistics and supply chain, non-medical equipment, essential life-saving goods, minor civil works (such as setting up temporary care centers), services, transportation, communication and coordination, etc.
Q. Can funds be used to finance preparedness?
No. The PEF is a facility to finance surge response. Funds will only be made available in times of crises, for countries that have been affected by an outbreak. Countries neighboring an affected country, but that have not been affected by the outbreak themselves, are not eligible to receive PEF funds.
Q. Is the World Bank planning to renew the PEF insurance window?
The World Bank is not planning to renew the PEF insurance window after the current pandemic bonds and swaps mature on July 15, 2020.
Frequently Asked Questions
Q. How was the PEF designed?
In the wake of the 2014/2015 Ebola outbreak, which showed the difficulty of efficiently mobilizing and distributing financing from the international community, the PEF was developed to help developing countries get funding to fight large-scale, cross-border pandemics. The PEF was designed in close coordination with the World Health Organization (WHO) and by a global team of experts in epidemiology, public health, and finance. The PEF has two components: a “cash window” designed to quickly release funding to countries in need, and an “insurance window” to help increase the scale of the response in the event of a worst-case scenario.
Q. Which countries are eligible for financing?
Countries eligible for PEF financing are members of the International Development Association (IDA), the World Bank’s institution that provides concessional finance for the world’s poorest countries.
Q. What is the PEF’s financial structure?
The PEF can provide financing through either its cash or insurance window. These are independent of one another and designed to be complementary.
Q. What is the role of the PEF cash window? Has it been used?
The PEF cash window can provide fast financial support to countries fighting disease outbreaks. Funds have been transferred within days after approval by the steering body.
The PEF has paid out $61.4 million from its cash window to fight the 9th and 10th Ebola outbreaks in the Democratic Republic of Congo in 2018 and 2019.
Q. What is the role of the PEF insurance window?
The insurance window works like any other insurance. It buys protection against a worst-case scenario – in this case, against rapidly growing, cross-border disease outbreaks, with the insured being the poorest countries and premiums being paid by donor countries. To activate payouts from the insurance window, an outbreak must meet specific, predetermined criteria or triggers.
Q. Which viruses are covered by the insurance window?
The insurance window covers six viruses that are most likely to cause a pandemic: new Orthomyxoviruses (new influenza pandemic virus A), Coronaviridae (SARS, MERS, COVID-19), Filoviridae (Ebola, Marburg), and other zoonotic diseases (Crimean-Congo hemorrhagic fever, Rift Valley fever, Lassa fever).
Q. How much insurance is available in the PEF insurance window?
The insurance window provides coverage of up to $425 million. The insurance was obtained in July 2017 in two classes and in both bond and swap form. Class A was composed of $225 million in bonds and $50 million in swaps, and Class B was composed of $95 million in bonds and $55 million in swaps. The bonds were issued under the IBRD’s Global Debt Issuance Facility, under the Capital at Risk Notes supplement which was created in 2014 in part to transfer catastrophe risks to the capital markets.
Q. What is the difference between Class A and Class B bonds?
Class A covers flu and coronavirus and Class B covers filovirus, coronavirus, Crimean Congo, Rift Valley and Lassa Fever. Coronavirus is covered by both tranches, with Class A covering coronavirus at a higher level of severity than Class B and for only 16.67% of the class.
Q: Who are the investors in the pandemic bonds?
The investor breakdown and summary terms and conditions for the bonds can be found here: https://www.worldbank.org/en/news/press-release/2017/06/28/world-bank-launches-first-ever-pandemic-bonds-to-support-500-million-pandemic-emergency-financing-facility
Q. Which donor countries have supported the PEF?
Australia, Germany and Japan.
Q. What is the PEF’s governance structure?
PEF operations are overseen by a steering body composed of donors (Australia, Germany, Japan), international organizations (including the World Health Organization, UNICEF, and the World Bank), and two IDA-eligible countries (currently Haiti and Liberia). Voting members of this body are Australia, Germany and Japan; WHO and the World Bank are non-voting members.
Event Eligibility Notices initiate the formal monitoring of an outbreak to determine its potential eligibility of payment from the insurance window. Notices were issued in the case of the 2018 Lassa fever outbreak in Nigeria, the 10th Ebola outbreak in the Democratic Republic of Congo, and COVID-19.