Coronavirus: The World Bank should care that the public does not understand its pandemic bonds

News and opinion on finance

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.

These criteria, of course, are complex. The terms describing them are buried in impenetrable documents such as the pandemic bond prospectus and the operations manual for the World Bank’s scheme.

Such documents have unsurprisingly escaped the attention of the hordes of voices online that have latched onto the bonds’ existence and are now, just as unsurprisingly, outraged at the fact that the bonds have not yet been triggered.

No matter that the World Bank and its associated institutions have pledged $12 billion to help fight the disease and that the pandemic bond is a mere $325 million. No, the crazed denizens of Twitter have declared the World Bank’s bond a conspiracy to enrich evil investors who are betting – betting! – with the lives of innocent people.


This is only to be expected, of course. Financial markets are complicated. Insurance is complicated. Hatred of both is simple. Why risk appearing to be the fool who doesn’t join in the abuse?

But “betting” on catastrophe is what those who offer insurance do every day. It’s what an insurer does when it covers the risk of your house burning down or you crashing your car. It’s what life insurers do when they speculate on when you are likely to die.

How outrageous that shadowy organizations should be betting on your life to provide for your family should the worst happen.

The criticism is all the more ignorant for its failure to appreciate that investors in pandemic bonds are, by definition, betting that you will survive. They lose money if enough people die. It really is as simple as that.

And so, to the conspiracies, and chief among them the accusation that the World Bank and the World Health Organization are avoiding “declaring” a pandemic to protect these bondholders.

It’s rubbish. There is no requirement for anyone to independently “declare” a pandemic for the bonds to pay out. There never has been. When the triggers for the bonds are hit, the bonds will pay out. That will happen even if no one has ever described the outbreak as a pandemic.

Untrue accusations of the kind that are being peddled now are dangerous. They will further erode public trust and will, ironically, make it harder for global assistance to be agreed upon and coordinated effectively 

There are legitimate questions to be asked about the usefulness or not of these pandemic bonds. Are they too complex? Can they be effectively modelled by investors? If they do pay out, is it likely to be too late to be of practical assistance to the weakest countries in the world, those that it is designed to help the most? If they do not pay out even in what is a severe crisis, are they fit for purpose?

These are all fair questions, and the World Bank will need to address them as it looks at further versions of the scheme when the current bonds mature in July.

But such questions are different to idiotic accusations thrown about by people who have neither the expertise to evaluate what they are complaining about nor the willingness to inform themselves before they do.

It has always been so with finance, simultaneously something complex and abstract for most people, and yet also something that touches practically everyone in their day-to-day life. For many, that superficial involvement is enough to justify a contribution to the chorus of protest when something fails to meet expectations.

As always, someone must be blamed.


For the industry or multilateral bodies to respond to every ill-informed criticism would be a monumental waste of time. But the current situation may be different.

Untrue accusations of the kind that are being peddled now are dangerous. They will further erode public trust and will, ironically, make it harder for global assistance to be agreed upon and coordinated effectively.

For all these reasons, they must be refuted. Many will not believe what they do not want to believe, of course, but to respond in terms that the broader public can grasp would at least remove some of the complexity and opacity that helps to fuel those conspiracies among those who are not malicious but just unaware of the facts.

Here the World Bank has failed in its communications. It should explain as clearly as it possibly can the conditions in which a scheme such as its pandemic bonds will pay out and when it will not. It should remind the world that the scheme’s conditions are transparent and a function of the data that each country reports, not the whim of a particular institution.

As Euromoney’s own reporting has found, getting answers to this complex situation is difficult, even with direct channels of communication with an institution such as the World Bank. For the public at large, this is all the harder.

It is understandable to focus on process above all else as the world grapples with crisis, but governments are rapidly finding that one of the biggest challenges they must respond to in the coronavirus crisis is communication. Wishing it were not so is not an answer. The World Bank needs to step up its game.