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Be prepared

Pandemic bonds from World Bank snapped up

Pension funds were major investors in the latest issue of catastrophe bonds by the World Bank, designed to cover the financial risk of pandemics around the world.

The global development bank has been working on this emergency financing facility for developing countries that face the threat of pandemics since 2015, eventually raising $425 million, the World Bank said in a news release at the end of June.

The bank launched bonds to tackle the cost of diseases with higher likelihood of an outbreak occurring such as Ebola. Some 42% of subscribers of investors in these bonds were pension funds from Europe and the U.S. Asset owners also backed another group of bonds aimed at less common outbreaks of severe acute respiratory syndrome.

The emergency facility is designed to get money flowing to a region where an outbreak has occurred faster than in the past.

The bonds pay investors a six-month dollar-denominated LIBOR rate plus an 11.1% coupon in the event of an outbreak of Lassa fever, Rift Valley fever and Crimean-Congo hemorrhagic fever or a six month dollar-denominated LIBOR plus 6.5% in the event of a SARS outbreak.