Three years prior to the COVID-19 pandemic the World Bank created the Pandemic Emergency Financing Facility (PEF). Similar to insurance, the PEF is designed to provide eligible countries and agencies with pre-pooled essential surge funding and therefore, help key responders minimise the health and economic impacts of a possible high-severity disease outbreak with pandemic potential . The PEF mobilises private sector funds from a number of investors that if activated, bypass governments and civil society to provide funding to health systems. Thereby, offering a more predictable solution for beneficiary countries that otherwise rely on charity in moments of crisis. While such a response seemingly offers a neat solution to the limited nature of public disaster relief funding by utilising private sector resources for disaster relief; the reality is that schemes such as the PEF provide ineffective and delayed aid that prioritises the needs of investors over the people that they were meant to help. The “disastrous”  delays to PEF funding have sparked outrage, with some suggesting that it was “an embarrassing mistake” , “designed to fail” by ultimately “waiting for people to die” .
The PEF is a form of catastrophe bonds. Catastrophe bonds are akin to insurance, in which money (the principal) is borrowed by the bond issuer (The World Bank in the case of the PEF) to insure against a disaster occurring at a specific time, place and severity. These specifics are known as trigger conditions, which are written into the bond contract. The contract also details a fixed payment schedule for the bond issuer to repay interest to the bond holders (investors). The principal is placed into a special purpose vehicle (a separate legal entity created by an organisation for a specific purpose), usually in a tax haven. If a disaster that meets the agreed trigger conditions occurs (see figure 1 below) before a bond’s maturity date (the end of the bond contract), the bond issuer receives the principal which is used to finance the disaster response. Consequently, bond holders forfeit their right to repayment and lose their money. If a disaster doesn’t occur then the bond holder gets paid principal with interest, with this interest providing profit for their investment. Essentially, investing into a catastrophe bond is a complex bet on if a disaster of a certain severity will occur at a specified time, in which investors stand to gain all-or-nothing.
The PEF has been criticised for delaying its $196 billion response to 64 of the world’s poorest countries with reported cases of COVID-19 until after all seven (legally binding) trigger conditions (see below) had been met, at which point the virus had already impacted most countries  .
PEF trigger conditions for a non-flu infectious disease outbreak :
- At least 12 weeks have passed from the date of the start of the event
- The outbreak needs to be in more than one country, with each such country having greater than or equal to 20 Confirmed Deaths
- The Growth Rate needs to be greater than zero to ensure that the outbreak is growing at a specific statistical confidence level
- The Total Confirmed Death Amount needs to be greater than or equal to 250
- The Rolling Total Case Amount needs to be greater than or equal to 250
- The Rolling Confirmed Case Amount needs to comprise a minimum percentage of the Rolling Total Case Amount
- Regional outbreaks affecting two to seven countries would activate payments of Pandemic Bond/Insurance Pay-out Amounts at three stages as the number of total confirmed deaths increases. Global outbreaks affecting eight or more countries also activate payments at three stages but provide access to higher funding levels at the first two triggers.
While its objectives advertise the PEF as an early-response mechanism, its trigger conditions call for action after a disease has spread despite infectious diseases like COVID-19 having a rapid growth rate . A paper published in The Lancet  proposes that the problems associated with the PEF’s trigger conditions stem from the bond contract being primarily written to reduce uncertainty for investors (whose millions of dollars are at stake), rather than for pandemic responders or the sick.
The funds released by the PEF are of comparatively low value considering World Bank donors paid $115 million for three years of cover  . Analysis suggests that more money was paid to investors as interest payments, than to eligible countries facing disease outbreaks . Additionally, the sum of money that was received by developing countries through the PEF was “relatively trivial” compared to the estimates of economic damage caused by COVID-19 . These barriers to the PEF being an effective global health tool centred around prevention, illustrate the fundamental tension between creating catastrophe bonds that provide timely and functional disaster response whilst also attracting sufficient profit-seeking investors.
Catastrophe bonds are evidence of the wider financialisation movement, in which the role of finance in our everyday social, political and economic lives is growing. We are becoming more dependent on financial markets through saving, borrowing and debt to manage the risks of daily life rather than on redistributive public policies. Following this trend, the ‘financialisation of nature’  refers to how the imminent threats of climate change are also being left to financial markets to be dealt with, as a result of the rising costs of dealing with these new risks.
The financialisation of disaster response is in some ways positive in that it in part removes its political nature. For example, when the former President Trump threatened to pull the US out of the World Health Organisation at the start of the COVID-19 pandemic despite being the single largest financial contributor, or the general trend of countries pledging but later not paying financial support for disaster relief  . Conversely, the circumventing of political actors poses certain problems; for example the PEF’s surge funding did not consult with government or civil society to ensure that health systems were ready for its finance, nor did it liaise with governments to consider if a plan was in place to distribute the funds , meaning funding was not used most efficiently, timely or impactfully.
Using what is effectively betting to handle (in the case of the PEF) some of the biggest health problems of our time highlights the importance placed on investor interests over global health outcomes. In a bid to raise funding are we ignoring the main aim of disaster relief- to provide immediate assistance to those in need and mitigate against crises? Does the financialisation of disaster relief therefore ignore the ‘human’ in humanitarian aid?
Onubha Hoque Syed is a final year Global Sustainable Development student, specialising in the interconnections between global health, economics, politics and culture.