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Pandemic Bond Switch 'Em Up
With promises that the World Health Organization’s (WHO) Pandemic Emergency Financing Facility (PEF) may-possibly-trigger-but-not-yet, developed and developing economies have resorted to issuing trillions in what are essentially post-event bonds as a result of COVID-19.
Yesterday the WHO announced the PEF has not yet met the criteria for a payout, despite the world being months into the coronavirus crisis.
The last criterion required to activate payment of the pandemic bonds: an exponential growth rate in IDA/IBRD countries as calculated by the third-party calculation agent (AIR Worldwide), has not been met.
WHO said that the next report from AIR on a bond trigger will be April 17.
The United States federal government budget deficit will reach a record $3.6 trillion in the fiscal year ending Sept. 30, funded by US Treasury Bonds being churned out following the coronavirus outbreak to blunt the economic impact.
And although the markets are able to absorb the mountain of new U.S. debt as global investors seek a safe harbor investment during the crisis, emerging economies that could actually benefit from the PEF are being forced to borrow at much higher rates that threaten any recovery.
This week Indonesia raised $4.3 billion a “pandemic bond with a 50-year tranche, its largest largest ever sovereign bond deal with proceeds being used to partially “fund its COVID-19 relief and recovery efforts.” And the Indonesian government has already announced plans to sell an additional $27.47 billion worth of pandemic bonds to cover increasing COVID-19 expenditures.
Indonesia’s opposition are already targeting these “pandemic bonds”, with National University of Jakarta professor quoted in local news reports arguing that the bonds threaten the stability of President Joko Widodo.
Covid-19 should not be the basis of Jokowi's government legitimacy to increase debt, especially with a very large nominal value, the time period is up to 50 years. Jokowi must also be careful, because debt bondage will undermine public confidence in the current government.
Quake Insurer Seeks Cyber Cover
The California Earthquake Authority will meet today on a proposal to purchase a $150 million limit cyber insurance policy, according to public documents. If approved the annual aggregate premium cap for the policy would be $1.5 million.
Broker Willis Towers Watson is assisting the CEA in the search for cyber cover.
According to CEA documents, government-backed quake insurers considers it an opportune time to purchase a cyber policy.
Currently, the CEA is in a better position than it would have been several years ago to tailor the insurance coverage it plans to purchase to the specific types of risks the CEA faces. These recent refinements in cyber policy forms have also given insureds a bit more control over premium pricing—CEA will be able to manage the cost of its cyber coverage by tailoring its coverages to conform to CEA’s risks.
Risk Links
ILS Non Correlation is Actually a Thing
We like ILS hedge funds and a reasonable number of our clients are invested in them because they are truly uncorrelated to the market. In a year without natural disasters, so far, these strategies have kept chugging along," said Christopher W. Walvoord, partner and global head of hedge fund research and portfolio management, Aon Hewitt USA Investments, Chicago.
Defensive strategies protect institutional portfolios from market mayhem, Pensions & Investments
Asia’s Still An Insurance Bright Spot
China is increasingly opening up its insurance market to foreign investment. The restriction on the ownership of life companies in China was lifted in January this year. The result is that foreign investments into any life or non-life insurers, reinsurers or insurance intermediaries are no longer subject to any foreign ownership restrictions.
What’s on the horizon for insurance companies in 2020?, Norton Rose Fulbright
Double Disaster
Florida’s U.S. senators called on the federal government Wednesday to issue guidelines on how states should handle evacuations and storm shelters in the event of a hurricane. And with less than two months to go until the tropics reach the conditions that forecasters expect will generate an above-average storm season, government officials and local politicians are hustling to prepare for what Broward County Mayor Dale Holness described as a “double disaster” of a hurricane strike amid a COVID-19 outbreak.
Coronavirus could create ‘compound disaster’ in Florida as hurricane season looms, Miami Herald
Private Debt Warning
Amid global economic uncertainty, investors in private debt are adopting a cautious approach to the next 12 months,” Preqin said in the report. Seventy-three percent of investor mandates for private debt funds in the first quarter are for commitments to a single fund, up from 62 percent a year earlier, according to the report.
Private Debt Funds Struggle to Raise Capital in Pandemic, Institutional Investor
