Fight Pandemics with Insurance, Yadav Writes in FT
Friday, May 20, 2016
WDI Senior Research Fellow Prashant Yadav co-authored a May 19 post on the Financial Times’ blog “beyondbrics” in which he advocates for new ways of raising and disbursing financial aid in the wake of a pandemic.
Yadav and co-author Akash Goel, a physician, journalist and World Economic Forum Global Shaper, wrote that the world is facing a “growing and menacing threat” from pandemics, with the Zika virus being the most recent example.
“With each new discovery, our response is bewilderingly clumsy, and we seem to be no more equipped to respond than before. In many ways, we tie our own noose,” they wrote.
Because the threat of pandemics is becoming more real, it is critical that local, national and international systems create well-managed systems to deal with them. But low-income countries with small tax bases are often incapable of investing in health system preparedness and therefore are more susceptible to pandemics.
Two newly-created methods of health financing for pandemics – the World Bank Pandemic Emergency Finance Facility and the World Health Organization’s Pandemic Contingency Fund – have been much heralded, Yadav and Goel write. But issues remain, namely disbursing money quickly to contain potential outbreaks before they grow into international threats.
To address this, Yadav and Goel argue parametric pandemic insurance could fill the need for early financing after outbreaks. “Countries could insure themselves against pandemic risk in much the same way as they insure themselves against hurricanes and other natural disasters,” they write.
As an example, the authors mention the Caribbean Catastrophe Risk Insurance Facility (CCRIF), a multi-country parametric insurance program that has bridged the liquidity gap faced by governments in the region. Spreading risk across a wide geographical area premiums have been lowered.
But the authors note that given the unpredictability of where and how pandemics strike, a much larger system initially would mean higher premiums and require multilateral donor agencies to subsidize the premiums for poorer countries. However, premiums could come down once more is learned about pandemics and what triggers them.
In conclusion, Yadav and Goel write: “The combination of new and emerging infections, increasing drug resistance, population density and transnational travel all add to the challenge of responding to pandemics in the 21st century. These factors are poised to create a landscape that’s ever more complex and requires new and innovative ways of financing for pandemics.”
Read the full article here. (Subscription required).