Climate Change Is a Complex Problem, But Complex Financial Products Aren’t the Solution
Neither the buyers nor the sellers are getting what they want out of these catastrophe bonds.
A scuba diver observes an angelfish in Quintana Roo, Mexico, where the Nature Conservancy introduced world’s first insurance policy on a coral reef, sometimes incorrectly described as a “bond.”
Photographer: Gerard Soury/Getty ImagesAlmost exactly four years ago the World Bank announced a pioneering project, the Pandemic Emergency Financing Facility, designed to develop a new insurance market and protect the world’s poorest countries against deadly disease. The PEF, as it’s known, was supposed to release funds quickly so that governments and organizations could mobilize “earlier, faster, better planned and coordinated” responses to future pandemics.
How’s that going now that the pandemic rubber has met the global economic road? Not great—for investors or those exposed to the coronavirus’s wrath. The bonds only paid out late last month, well after the scale of the pandemic’s impact had become clear. The world’s poorest countries are now able to apply to receive some of the $195.8 million allocated for “surge responses,” such as building temporary healthcare facilities. But several public health experts have criticized the complex set of triggers necessary for the money to be released.