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Pandemic bonds, and their cousins in the broader catastrophe bond sector, are peculiar animals. They are frequently complex, somewhat opaque, and they must wade through the mire of morbid possibility.
But at heart they are insurance. Like most insurance policies, they involve an assessment of the risk of unpleasant events. The relief they provide is determined by strict conditions. Fail to meet those and there is no pay-out.
The coronavirus Covid-19 outbreak racing around the world has raised the profile of the pandemic bonds that the World Bank issued in 2017. They have not yet been triggered, neither by Ebola outbreaks since 2017 nor by the coronavirus crisis of 2020.
For coronavirus this is for the simple reason that the bonds are only even considered for pay-out once an epidemic has run for 12 weeks. And at that point it must meet certain other criteria, such as the number of deaths, the number of cases, the geographic spread and the extent to which the epidemic is still growing in severity.
