Abstract:

The design of a strategy for financing Extreme Risk Events in Emerging markets is very complex in the actual context of multiple global problems. The impact of the coronavirus global crisis CGC 2020 (128k global cases, 4,72k global deaths at 12/03/2020) in markets is impressive, on worries over the dynamics of evolution of this pandemy, on the strains of the virus on suppply chains and it signal a possible economic dowturn.

In this extreme uncertainty picture, the fight against the spread of COVID-19 virus, and the economic recovery, the officials leverage their efforts in order to formulate a clear and efficient strategy. The problem of emerging markets is more complex because of the limitations and inneficiencies regarding infrastructures, markets and leadership.

The processes of emergency funding are designed based on the analysis of the level of preparation, the prospects on the dynamics of this extreme event and the mechanics of an efficient and effective risk transfer. The problem is related to the fact that the insurance or reinsurance markets could not respond efficiently and the use of the capital markets (by using the conventional catastrophe bonds) is not feasible in emerging markets. The government is not only a last resorst but also a unique actor in this picture.

There is a critical need to design a new vision for emergency funding in the case of this new type of extreme events, by taking into account the interactions and synergies between different types of crisis, and using innovative solutions capable to trigger synergistic effects for a prompt, adequate, well-structured response.

The objective of this paper is to offer a new design of strategic financing programs dedicated and adapted to emerging countries, that integrate an optimal mix of monetary and fiscal policies matching with the configuration of the COVID -19 global health crisis (CHC). This proposal is also oriented on the design of a special purpose vehicle SPV for typical post-disaster financing strategies. The SPV must ensure immediate post-disaster liquidity and also the funds for post-crisis recovery actions.

Keywords:

COVID-19 global health crisis (CHC), alternative investments (AI), extreme risk events (ERE), special purpose vehicle (SPV).