Pandemic Insurance through Pandemic Partnership Bonds: A Fully Funded Insurance Solution in a Public Private Partnership

Policy Letter No. 86

Authors:
Helmut Gründl,
Fabian Regele
Research Area:
Financial Markets
Date:
May 2020
Keywords:
Covid-19-Crisis, catastrophe bond, public private partnership, pandemic insurance
Abstract:

This Policy Letter outlines a pandemic insurance solution through a pandemic-related “Insurance Linked Bond”. It would be originated by governments, with a principal amount to cover significant costs resulting from a pandemic. These bonds, which would be traded on a secondary market, generate a risk-adequate return for private and institutional investors that is financed through the insurance premiums paid by the public domain. In case of a pre-defined pandemic trigger event, the principal of the bond becomes available for the originating governments to cover pandemic-related costs. Through this approach, governments can insure themselves against future pandemic-related risks, while funding comes primarily from private and institutional investors.

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