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Pandemic Emergency Financing Facility: Frequently Asked Questions

May 9, 2017

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What is the Pandemic Emergency Financing Facility (PEF) and why is it needed?

  • The Pandemic Emergency Financing Facility (PEF) – a financing mechanism housed at the World Bank – is designed to provide an additional source of financing to help the world’s poorest countries respond to cross-border, large-scale outbreaks.  
  • Launched in July 2017, the PEF is based on the experience of the devastating, cross-border 2014-15 West Africa Ebola outbreak, which claimed more than 11,000 lives. At the time, the world lacked the appropriate financial mechanisms to drive resources for outbreaks that were quickly escalating.
  • It was developed by a global team of experts in epidemiology, public health and finance so that countries could get the support they need to fight deadly, cross-border pandemics. 
  • The PEF complements the much larger role that IDA, the World Bank’s fund for the poorest countries, and other international organizations and donors play in financing outbreak response.

Who is covered under the PEF, for what, and how much funding has it provided so far?

  • The PEF is designed to provide an additional source of financing to help the world’s poorest countries respond to cross-border, large-scale outbreaks.     
  • The PEF has a cash window and an insurance window. The insurance window provides coverage of up to $425 million to all IDA-eligible countries for diseases that are listed by WHO as likely to cause major epidemics if contagion spreads across national borders. These include new pandemic influenza, SARS, MERS, Ebola, Marburg and Crimean Congo hemorrhagic fever, Rift Valley fever, and Lassa fever.
  • The PEF has been triggered twice, for the 9th and 10th Ebola outbreaks, in 2018 and 2019 respectively. Payments of $31.4 million have been made to fight Ebola in the Democratic Republic of Congo (DRC) - $11.4m in 2018 for the 9th outbreak and $20m in 2019 for the 10th outbreak.

How is the PEF financed?

  • The PEF is designed to be flexible, with a cash window that complements its insurance window.
  • The insurance window provides coverage of up to $425 million to all IDA-eligible countries for diseases that are listed by WHO as likely to cause major epidemics if contagion spreads across national borders. These include new pandemic influenza, SARS, MERS, Ebola, Marburg and Crimean Congo hemorrhagic fever, Rift Valley fever, and Lassa fever.
  • PEF’s payments can go directly to governments and pre-approved frontline responder organizations (such as WHO & UNICEF) and it can do so through either its cash window -- or once triggered through its insurance window.

What is the cash window of the PEF and how does it work?

  • The PEF’s cash window can help in cases where trigger criteria for the insurance have not been met, such as when an outbreak has not crossed a border, or for pathogens not covered under insurance.
  • It is financed by donors (currently Germany and Australia).
  • Here’s how the cash window works:
  1. When the PEF Coordinator’s office receives a request of funds from the cash window, it reviews it against the pathogen type and epidemiological thresholds. If the event is deemed eligible against these criteria, it is referred to subject-matter experts -- the Strategic Technical Advisory Group on Infectious Hazards, constituted by WHO. David Heymann is the Chair of this committee.
  2. The PEF Coordinator sends a recommendation to the steering body, which takes a decision accordingly. 
  3. The recommendation is sent to the steering body, which takes a decision accordingly. 
  4. If approved, funds can be disbursed to the government or to pre-approved frontline responder organizations such as WHO and UNICEF.

 

What is the insurance window of the PEF and how does it work?

  • The PEF’s insurance window works like any other insurance: it pays a premium to buy protection against a worst-case scenario of a cross-border pandemic.
  • The insurance window has purchased $425 million aggregate insurance at an annualized premium cost of $36.2 million (or equivalent to 8.5%).
  • The payment for bond coupons is covered in part by the PEF and in part by the World Bank. The portion paid by PEF is funded by the donor governments (currently Germany, Japan).
  • Financing provided by donor countries is being used to pay premiums. Parametric insurance is priced as a multiple of the annual probability of losses from the insured events occurring. On that basis, and relative to the general market for parametric insurance as well as the initial price guidance, the price of the insurance transaction is extremely low. The multiples achieved were 1.93 for Class A (72 basis points below the mid-point of the guidance) and 1.48 for Class B (112 basis points below the mid-point for the guidance).
  • Dividing the annual cost of the insurance by the population of the countries it covers, PEF insurance costs 2.1 cents per person per year.
  • Here’s how the insurance window works:
  1. When there is a disease outbreak that is covered by the insurance window, the PEF Coordinator issues an Event Eligibility Notice to the third-party calculation agent, which formally begins monitoring the outbreak to determine potential eligibility of payment from the insurance window.
  2. If the parametric triggers have been met, the third-party calculation agent declares the insurance window triggered.
  3. The government is then notified, and they specify where the money should be sent – either to the government or directly to pre-approved frontline responders, such as WHO and UNICEF, who are supporting the government’s response efforts.

What are the criteria for accessing funds from the PEF? 

  • A pay-out from PEF’s insurance window is triggered if certain criteria – such as outbreak size, growth rate and spread across borders – are met.
  • The specific trigger conditions for the PEF were chosen by health experts at the World Bank in close coordination with the WHO, balancing the need for robust coverage against the health and economic impacts of a major outbreak with a manageable cost for insurance.   
  • Insurance modelers did not decide on the trigger conditions.  The model itself could accommodate any type of trigger.

What is the governance structure of the PEF?

  • Operations of the PEF are overseen by a steering body composed of donors (Japan, Germany, and Australia), international organizations (including the World Health Organization, UNICEF, and the World Bank), and two IDA-eligible countries (Liberia and Haiti). Voting members of the steering body include Japan and Germany; WHO and the World Bank serve as non-voting members. 
  • The PEF Coordinator actively monitors disease outbreaks and is in constant communication with affected countries and international responding agencies, such as the WHO and UNICEF. 
  • So far, health events that the PEF Coordinator's office has monitored include the Marburg virus in Uganda, plague in Madagascar, and two Ebola outbreaks in DRC. 
  • Event Eligibility Notices were issued in the case of the 2018 Lassa fever outbreak in Nigeria and the 10th Ebola outbreak in DRC.  These notices initiate formal monitoring of an outbreak to determine potential eligibility of payment from the insurance window. 
  • The PEF has paid out twice, with financing in early stages of DRC’s outbreaks.

Is the PEF the only crisis support instrument of the World Bank Group?

  • The PEF complements the much larger role that IDA, the World Bank’s fund for the poorest countries, and other international organizations and donors play in financing outbreak response.
  • The PEF is one element of the World Bank Group’s Global Crisis Management Platform, which brings together a range of crisis support instruments to IDA-eligible countries that face an outbreak.
  • For example, in July 2019, the World Bank announced an additional $300 million in aid, financed largely through IDA, to help the DRC respond to the outbreak and return to a more durable development path. It expands on $80 million already disbursed from IDA’s contingency crisis mechanisms. These funds help support immediate requirements: establishing Ebola treatment centers; supporting frontline health workers with hazard pay; setting up handwashing stations to help curb transmission; and financing mobile laboratories, case-tracking teams to trace the disease, and decontamination teams to ensure that outbreak areas can be made safe again.

Last Updated: Aug 15, 2019