The world Bank released the world’s first bonds and derivatives in the event of a pandemic

Moscow. June 29. INTERFAX.RU the world Bank (WB) has placed the world’s first “pandemic” of bonds and derivatives to support developing countries in case of outbreaks of infectious diseases, said in the presentation video and the press release of the WB.

Only WB was able to raise $320 million through the placement of two issues of bonds with a maturity of 3 years – $225 million and $95 million, the coupon Rate for the first is 6.5% above 6-month LIBOR in U.S. dollars, the second – by 11.1% higher. In addition, the world Bank offered the swaps of $105 million to protect the poorest countries against pandemics. The first bonds will cover illness caused by the coronavirus and pandemic strains of influenza, the second – filovirus infections such as Ebola and other fevers.

The proceeds transferred in the created WB in 2016 a special Fund – the funding Mechanism for emergency measures in the event of a pandemic (Pandemic Emergency Financing Facility, PEF).

The bonds have a payment of regular coupons, however, in the event of a pandemic, investors lose part of the income on bonds or the principal, these funds will be transferred to the affected States and to charitable organizations that help them. The leading underwriter was the Swiss reinsurance company Swiss Re. The organization also participated Munich Re and GC Securities.

The decision on bond issue was a result of the outbreak in 2013-2014 of the Ebola epidemic that claimed the lives of 11 thousand people in Guinea, Liberia and Sierra Leone and other West African countries. According to WB estimates, the death toll would be 90% less if the country got access to financing in the early stages of the spread of the virus. To fight the epidemic, international organizations spent about $7 billion.

According to the economists of the world Bank, the damage from the moderately strong and strong pandemic could reach $570 billion per year, or about 0.7% of world GDP. The event of the epidemic of Spanish flu in 1918 could cost the world up to 5% of GDP, or almost $4 trillion.