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How ‘pandemic bonds’ are fueling coronavirus conspiracies

What is the panic about?


Mike Rothschild


Posted on Mar 9, 2020   Updated on Jan 27, 2021, 9:04 am CST

The coronavirus pandemic has been a magnet for countless conspiracy theories about its origins, its “real” fatality rate, and whether the whole thing is just a hoax to hurt President Donald Trump. But other than the standard-issue “big pharma is doing this to make money” conspiracies, none have ventured into the “rich cabal getting richer” territory that so many other plots land on.  

From the sinking of the Titanic supposedly being a ruse to clear away opposition to the Federal Reserve to the “missing $2.3 trillion” of 9/11, most conspiracy theories eventually reveal that they’re really about the rich pulling strings, manipulating world events for profit.

That wasn’t the case with coronavirus. 

But then the internet found out about “pandemic bonds.” And coronavirus suddenly had a whole new set of conspiracy theories.

What are pandemic bonds?

To start with, “pandemic bonds” are a real thing. What’s officially known as the Pandemic Emergency Financing Facility (PEF) is, according to the World Bank’s rundown of the fund, “a mechanism developed by the World Bank together with the World Health Organization (WHO) and private sector partners to provide surge financing for response efforts to countries affected by a large-scale outbreak to prevent the outbreak from reaching pandemic proportions.”

Essentially, it’s a pool of money financed by the sale of catastrophe bonds meant to help developing nations contain and pay for pandemics. 

The PEF started in 2017 as a response to the Ebola outbreak of 2014, and initially launched with $330 million provided mostly by investors in Europe. The bonds are lucrative, paying back interest rates as high as 11%— but if a pandemic reaches certain triggers (lasting three months with high numbers of deaths in multiple countries), then the bonds are used by the WHO and the investors lose their money.

All nations are eligible for the funds at no cost, the funds never need to be repaid, and coronaviruses like COVID-19 are on the list of diseases that qualify for payment—though COVID-19 isn’t specifically mentioned because it didn’t exist at the time.

While much of the PEF’s operation is laid out in complex financial terms, there’s one crucial detail in the fund’s founding documents that became conspiracy theory fodder: the three-year window for the funds to mature.

The insurance window’s initial period of funding runs from July 1, 2017 to June 30, 2020. And while the fund is expected to be renewed, it hasn’t been yet. 

Meaning that investors will get their original investment back if it’s not. Beyond that, very little money from the PEF has ever been paid out (about $30 million for the Ebola outbreak in 2018), meaning it’s just sitting there, and has increased to nearly half a billion dollars.

And so, coronavirus subreddits, right-wing blogs, and Twitter are buzzing with a conspiracy theory that COVID-19 was unleashed by the WHO so that they and the World Bank could declare a pandemic and keep the money, rather than pay it back when the fund matures in July. 

The “triggers” that would make the money available, however, could also just as easily be ignored by the WHO, thereby letting the outbreak get worse while the hundreds of millions meant to help contain it don’t go anywhere.

As with most conspiracy theories, there are alternate versions spinning off from the initial plot. One is the claim that the WHO refuses to declare coronavirus to be a pandemic, because it would force them to pay out the money to the afflicted rather than just keeping it for themselves, and that the fund was never designed to be paid out at all.

Another, seemingly opposite claim, is that the WHO actually does want to declare a pandemic but is being blocked by vague Wall Street entities so the fund can’t be paid out and investors will get their money back. No matter the details, conspiracy believers see the mere existence of the pandemic bonds as essentially the worst form of death cult capitalism: either releasing or delaying treatment for an outbreak so that rich investors and NGOs can make just a little more money to add to their endless pile.   

And they are making money. The bonds pay out varied interest rates depending on the pandemic the investor is betting on. For coronavirus, the bonds pay out 11% annually, a substantially higher rate than typical bond issues. So for several years, PEF bonds have been one of the best investments around. 

But that doesn’t mean they’re part of a conspiracy. For one thing, there’s no evidence that the PEF bonds won’t be repaid to their investors if June 30 passes and the fund isn’t renewed. This is how bonds work—they’re a loan made to an organization by a private investor, which pays interest until it matures and is paid back. The risk for the investor is that the organization spends its money without being able to pay it back, but this is built into catastrophe bonds, which offer higher interest rates in exchange for the risk that they’ll be needed—and therefore lost to the investor.

Beyond that, catastrophe bonds weren’t made up by the WHO to monetize a disease outbreak. They were first developed in the late 1990s in the wake of Hurricane Andrew putting crushing losses on the books of a number of major insurance companies. They can be issued either by insurance companies or government funds and have been paid out for a range of disasters, including earthquakes and floods. They’re essentially a high-risk investment with a fairly small imprint in the financial sector as a whole.

The reasons why the WHO hasn’t declared COVID-19 a pandemic are complicated, but seem to come down to the nature of the illness. Pandemic plans in the western world are mostly designed for the flu, but this coronavirus doesn’t behave like flu—meaning that declaring a pandemic will send countries scrambling in the wrong direction. It also conjures up images of panic in a public used to movie versions of outbreaks that wipe out most of humanity in days or weeks. That’s not what’s happening here, and the WHO doesn’t want people to believe it is.

That’s not to say there haven’t been legitimate criticism of the PEF. For one, it really is monetizing disaster, allowing the wealthy to profit off the possibility of a pandemic running through the developing world. Its rules for releasing funds are hugely complicated, and the dispersal of the money moves too slowly. Funds can only be transferred 12 weeks after the WHO first releases a “situation report” on an outbreak, meaning the money for coronavirus (written about by the WHO in January) won’t be available until April.

Despite its good intentions, the fund has been sharply criticized by top names in finance, including former U..S Treasury Secretary Larry Summers, who called the PEF “financial goofiness,” while other financial experts and NGO officials called them “obscene” and “useless.”

These criticisms usually don’t play into the conspiracy theories, which ignore inconvenient evidence against them. Finally, while the nearly half-billion dollars in the PEF sounds like a lot, it’s a pittance compared to the $10 billion China has already allocated for fighting coronavirus, or the $8 billion the U.S. has. It’s money that might have done some good months ago, but won’t mean much now.

It’s alluring to tie the coronavirus outbreak together with the wealthy financiers of the world and make a massive conspiracy out of the whole thing.

But the WHO is such a massive organization with such a huge budget ($4.4 billion all told) that the money in the PEF is simply not enough to engineer such a convoluted conspiracy. It’s not clear if the PEF will be paid out or renewed, but either way, it will render the conspiracy moot. Either the money will be used for its initial purpose, or go back to its investors.

Ultimately, this is a conspiracy with a ticking clock that will go off one way or the other, either in April or July. When it does, we’ll likely be into a whole new world of coronavirus conspiracies, and the one about the World Health Organization scurrying around to keep half a billion dollars might seem quaint. 


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*First Published: Mar 9, 2020, 6:30 am CDT