Pandemic Bonds: What the WHO's Declaration Means for Investors
The World Health Organization declared Wednesday that the COVID-19 outbreak has now officially reached pandemic proportions, with people around the globe having contracted the virus. Although developed countries largely have the resources necessary to fight the disease, the same can't be said for poorer nations around the world.
In an effort to help those countries, the World Bank came up with an idea that would potentially channel much needed funding in the event of such an outbreak. Pandemic bonds are designed to make payments to poorer nations when an outbreak reaches certain criteria, with investors who bought the bonds essentially betting on such an event not happening. Although the WHO's declaration that the COVID-19 outbreak is officially a pandemic didn't in itself trigger payouts from the bonds, it now looks like a near certainty that the bonds will pay out to affected nations -- leaving some pandemic bondholders with huge losses.
Historically, it's been difficult for the World Bank and other relief organizations to get funding to countries in need quickly. When a crisis occurs, organizations have to reach out to seek financial assistance, and governments are often slow to act and provide inadequate amounts of money to truly help.
Source Fool.com
