Money for biological emergencies is almost always found — after the emergency has started, on terms negotiated under pressure, and too late to have bought anything beforehand. Several countries have built ways of paying earlier. The UK has not.
How emergencies are paid for now
Defra’s contingency plan for exotic notifiable diseases in England is explicit about where the money comes from when an outbreak exceeds normal budgets: the department’s finance director can claim reserve funding from HM Treasury. The legal powers to cull and compensate come from the Animal Health Act 1981. The money itself is found as the outbreak unfolds.
This works, in the narrow sense that no British outbreak response has ever stopped for lack of funds. The 2001 foot-and-mouth epidemic cost the public sector more than £3 billion at the time, including £1.1 billion in compensation for slaughtered animals. More recent avian influenza outbreaks have been far smaller: the National Audit Office reports that Defra paid £58.5 million in avian influenza compensation between 2020–21 and 2023–24. In each case the money appeared.
But the system has three costs that do not appear in any budget line.
The first is uncertainty. Nobody — not farmers, not processors, not local authorities — knows in advance what will be paid for, by whom, or on what terms. Compensation rules exist for some diseases and are announced during an outbreak for others. The flagship article in this issue argued that the misaligned ledger between payers and beneficiaries is one of the main reasons prevention is underfunded; a system in which the split is decided after the event makes that ledger impossible to manage.
The second is delay. Money negotiated during an emergency arrives later than money agreed before it, and in biological emergencies time is the most expensive input. A 2021 modelling study of a potential foot-and-mouth outbreak in Austria found that detecting it seven days earlier would cut the number of infected farms by 70% and control costs by 65%, while detecting it seven days later would raise control costs by 182%. Each day of an epidemic, the authors estimated, would cost Austria €9–16 million.
The third is the crisis premium. Emergency money buys less. The UK Covid-19 Inquiry’s report on procurement found that of about £14.9 billion spent on personal protective equipment, almost £10 billion was wasted — the result, it concluded, of an inadequate stockpile and plans that had never been tested. Money spent in a crisis is spent under time pressure, in a seller’s market and with weakened controls.
And there is a fourth cost, which is the subject of this issue as a whole: emergency finance buys nothing before the emergency. The World Bank’s International Working Group on Financing Preparedness described the pattern in 2017 as a cycle of “panic and neglect”: abundant money after a crisis, scarce money before the next.
What pre-arranged finance is for
Financing biological risk before the crisis is not mainly about raising more money. It is about changing four things.
Who pays. A pre-arranged mechanism settles the split between government, industry and others before anyone knows who will be affected. That is easier to agree behind the veil of ignorance than in the middle of a cull.
How fast. Money that is already in a fund, or available under a pre-agreed trigger, can be released in days rather than weeks.
What behaviour it rewards. A levy, premium or compensation rule is a price. Priced well, it can reward keepers who invest in biosecurity and report early; priced badly, it can do the opposite. The Prevention Paradox in this issue sets out the evidence on compensation design.
Whether readiness is funded at all. A standing fund can pay for surveillance and preparedness as well as response. Emergency finance, by definition, cannot.
Risk layering
The disaster-risk-finance literature, developed largely at the World Bank for natural hazards, offers a useful framework. Different kinds of loss call for different instruments. Clarke and Mahul describe a risk-layering approach, in which reserves finance small and frequent losses, contingent credit provides capacity for moderate ones, and insurance or reinsurance covers the rare and catastrophic.
Biological risk maps onto these layers reasonably well:
Frequent, moderate events — seasonal avian influenza, bluetongue, localised swine disease — are predictable enough in aggregate to be funded from a standing reserve built up from levies and public contributions.
Severe but uncommon events — a foot-and-mouth outbreak on the scale of 2007 — need a pre-agreed source of additional funding that can be released quickly: a contingent reserve, a credit line or a pre-authorised claim on central funds.
Catastrophic events — a foot-and-mouth epidemic on the scale of 2001, or a zoonotic pandemic — exceed what any sector fund or private market can bear, and ultimately fall on the state. The question is whether the state’s role is agreed and priced in advance or improvised afterwards.
Standing animal disease funds: Germany and the Netherlands
Germany’s Tierseuchenkassen
Every German state (Land) operates an animal disease fund, a Tierseuchenkasse, established as a public-law body. Livestock keepers pay compulsory annual levies per animal. When animals are culled on official orders, compensation is paid half from the fund — that is, from keepers’ levies — and half by the Land. The Lower Saxony and Bavarian funds both describe this 50:50 split, with EU co-financing usually available for major epidemic diseases such as swine fever, avian influenza and foot-and-mouth. Compensation is capped per animal; Lower Saxony, for example, sets maxima of €1,500 per pig and €110 per bird. The funds also subsidise disease-control and vaccination programmes, and levies are adjusted after outbreaks to rebuild reserves.
The most interesting recent development concerns incentives. In October 2025 the Lower Saxony fund set out how compensation will be reduced where keepers break their legal obligations. From January 2026 for pigs and poultry, and January 2027 for cattle, keepers without a biosecurity management plan face reductions of up to 25%. Specific hygiene failures, such as not keeping wild boar away from pigs, carry fixed deductions. In past avian influenza cases, reductions have reached 95%.
That is exactly the kind of price signal the economic literature recommends. Compensation still removes most of the disincentive to report — keepers who follow the rules are compensated — but it no longer insures keepers fully against the consequences of neglecting biosecurity.
The Netherlands’ Diergezondheidsfonds
The Dutch Animal Health Fund, established in 1998, is the financial instrument for the costs of controlling, monitoring and preventing contagious animal diseases. A 2019 evaluation by Wageningen Economic Research sets out its design. For disease control, each livestock sector pays 100% of costs up to a sector-specific ceiling, and the state pays everything above it. For monitoring and surveillance, costs are split 50:50. Over time the sectors’ share of the fund’s total costs rose, from about a third in 2002–2014 to nearly half after 2015.
The ceilings are set in five-year agreements between government and sector organisations. Under the 2025–2029 agreement, signed in 2024, the ceilings for the pig and poultry sectors were reported as €62 million and €97 million. They were modelled so that there is only about a 1% probability that the costs of a foot-and-mouth, classical swine fever or avian influenza outbreak would exceed them, and they took account of the sectors’ financial capacity as well as risk.
The Dutch model does three things well. It makes the sectors bear the first, most frequent layer of cost, which gives them a direct interest in prevention. It caps their liability, so that a catastrophic outbreak does not bankrupt the industry. And it funds surveillance from the same arrangement, so that readiness is not left to compete with everything else in a ministry budget.
The Netherlands has had expensive outbreaks — foot-and-mouth in 2001 cost the fund about €231 million and avian influenza in 2003 about €249 million — so the model has been tested.
The EU layer
Both countries also draw on EU co-financing. Under Regulation (EU) No 652/2014, which governed veterinary emergency funding until 2020, the Union reimbursed a basic 50% of eligible emergency costs, rising to 75% for cross-border measures or lower-income member states and to 100% for serious Union-wide risks. Grants were conditional on compliance with EU law. A Commission evaluation published in 2026 found that €231.86 million was paid to member states in emergency veterinary support between 2014 and 2020; the Single Market Programme Regulation of 2021 continued the arrangement. The UK no longer has access to this layer.
Private insurance: useful, but not for the catastrophe
Private insurance plays a real but limited role. In Germany, where the Tierseuchenkasse pays only the market value of culled animals, insurers such as R+V/Vereinigte Tierversicherung sell cover for loss of earnings from notifiable diseases — the business interruption, marketing bans and restocking delays that compensation does not cover. R+V reports paying around €36 million in avian influenza claims since 2020.
The limits are well documented. Animal epidemics are correlated risks: when foot-and-mouth arrives, it affects many insured parties at once, which is precisely what private insurance pools cannot absorb. Adverse selection means keepers who know they are at higher risk are more likely to buy cover. Moral hazard means insured keepers have less reason to invest in biosecurity. And public compensation crowds out private demand: if the state pays for culled animals, keepers see less need to insure. European studies have found producer interest in epidemic insurance to be limited, and have argued for public–private partnerships rather than purely private markets for what they call crisis risks.
The lesson is not that insurance has no place, but that its place is in the layers the state does not cover — business interruption, consequential losses — and above a public floor, not instead of one.
International pandemic finance: a cautionary tale
The most ambitious attempt to insure biological risk ended badly, and its lessons matter for anyone designing pre-crisis finance.
In 2017 the World Bank launched the Pandemic Emergency Financing Facility (PEF), which included catastrophe bonds and derivatives designed to release funds to poor countries if a pandemic met pre-defined triggers. When Covid-19 arrived, the triggers were eventually met — by 17 April 2020, according to the Centre for Disaster Protection — and on 27 April 2020 the World Bank allocated US$195.84 million to 64 countries. By then the virus had been spreading internationally for months. Critics, including Brim and Wenham writing in the BMJ in 2019, had already argued that the facility was too slow and too expensive for what it offered; reported costs of the insurance scheme had reached about US$114.5 million by the end of 2019. The PEF closed in 2020.
The failure was one of design rather than principle. Parametric triggers — automatic payouts based on measurable conditions — are fast only if the conditions are met early in an event. The PEF’s triggers required an outbreak to grow large and to persist for weeks before paying, which protected investors but defeated the purpose.
Since then the international system has leaned on funds rather than bonds. The WHO Contingency Fund for Emergencies can release money within 24 hours and released nearly US$30 million across 24 emergencies in 2025, but WHO describes its balance in 2026 as critically low. The Pandemic Fund, established in 2022, finances preparedness in low- and middle-income countries. And when an Ebola emergency was declared in May 2026, its board activated emergency procedures to provide up to US$220.6 million — US$175.7 million of it reprogrammed from existing preparedness grants.
That last point is telling. In the absence of dedicated surge finance, a fund created to pay for prevention was used to pay for response. The flagship described how response crowds out prevention inside national budgets. The same mechanism operates internationally.
Other instruments exist. The World Bank’s contingent credit lines for catastrophes (Cat DDOs) now cover public health emergencies caused by biological events, up to US$500 million or 1% of GDP. The G20 High Level Independent Panel’s 2025 report, Closing the Deal, called for countries to spend 0.1–0.2% of GDP a year on preparedness and for new surge financing facilities. None of this yet amounts to a coherent layered system.
The UK: what it has, and what it could build
What the UK has
The UK has emergency powers, compensation rules for some diseases, and access to Treasury reserves. It does not have a standing animal disease fund, a pre-agreed split of costs between government and industry, or a pre-arranged source of finance for severe outbreaks.
This is not for want of consideration. In December 2010 the Responsibility and Cost Sharing Advisory Group, chaired by Rosemary Radcliffe, rejected a general industry levy — concluding that its disadvantages would “far outweigh any perceived advantages” — but recommended further work on incentives and insurance involving private underwriters. The government’s response in 2011 established the Animal Health and Welfare Board for England and deferred cost-sharing. The NAO’s 2025 report notes that Defra is again reviewing how responsibility and costs are shared between government and industry.
What it already knows how to do
The UK already operates a successful public–private reinsurance scheme for a correlated catastrophic risk: Pool Re, established in 1993 to cover commercial property against terrorism. Insurers pass terrorism risk to Pool Re, which holds a fund of about £7.3 billion, buys commercial reinsurance and issued a catastrophe bond, and is backed by an unlimited HM Treasury guarantee that has never been called upon. Pool Re has paid more than £2 billion in premiums to the Treasury for that guarantee since 2001.
After Covid-19, insurers and Lloyd’s proposed pandemic equivalents — a “Pandemic Re” modelled on Pool Re, and a Lloyd’s “Black Swan Re” backed by a government guarantee — but these have not been adopted. The 2021 Supreme Court judgment in the FCA’s business interruption test case showed how much pandemic cover had existed only by accident of policy wording. The proposals remain relevant: the structural problem they addressed has not gone away.
A layered proposal for the UK
Drawing these threads together, we propose a layered approach to financing animal disease risk in Great Britain. It is deliberately modest: each layer has a working model elsewhere.
Layer 1: a standing Animal Disease Fund. A fund financed by a combination of Defra contributions and capped levies on livestock sectors, on the Dutch model. Each sector would bear the costs of disease control up to a ceiling set in a five-year agreement, with the state paying above it. Surveillance and preparedness would be funded from the same arrangement, split between government and industry. This layer covers frequent, moderate events and, crucially, funds readiness.
Layer 2: compensation linked to biosecurity. Compensation paid through the fund would remain available to all keepers who report promptly, but would be reduced — progressively and predictably — for keepers without required biosecurity measures, on the German model. The level and conditions should be set with explicit reference to the evidence on reporting and biosecurity incentives, and evaluated.
Layer 3: a pre-agreed contingent reserve. For severe outbreaks that exceed the fund, a ring-fenced, pre-authorised facility — agreed with HM Treasury in advance, with triggers and limits — would replace the current practice of negotiating reserve claims during an emergency. The aim is not more money but faster, more certain money.
Layer 4: a public–private reinsurance layer for consequential losses. For catastrophic outbreaks, the largest uncompensated losses fall on businesses outside farming, as they did on tourism in 2001. A Pool Re-type scheme for business interruption from notifiable disease controls, with a government guarantee priced and paid for, would bring private capital to a risk that is otherwise borne haphazardly.
Two conditions would make the difference between this and a funding mechanism alone. The first is that the split of costs should be based on an explicit map of who benefits — the distribution the OHS Prevention Ledger‘s sixth step is designed to produce. The second is that the arrangement should be agreed across all four UK administrations, because animal disease does not respect devolved boundaries and a weakest-link gap in one nation is a risk to all.
Objections
“Industry cannot afford levies.” Some sectors are under severe financial pressure. That is why ceilings matter: the Dutch agreements explicitly take financial capacity into account. It is also an argument about who pays, not about whether paying in advance is better than paying afterwards.
“The state pays anyway, so why formalise it?” Because an informal backstop is the worst of both worlds: it removes the incentive for industry to prevent losses, without giving the state any of the control, pricing or readiness funding that a formal arrangement would provide.
“Insurance just moves money around.” Partly true. But moving money earlier changes what it can buy, and pricing risk changes behaviour. Those are the two things this issue argues matter most.
“The PEF shows this does not work.” The PEF shows that badly designed triggers do not work. The German and Dutch funds, Australia’s cost-sharing deed and Pool Re show that well-designed pre-arranged finance does.
What would prove this wrong?
If countries with standing animal disease funds showed no better readiness funding, reporting behaviour or response speed than countries without them, the case for Layer 1 would be weakened.
If compensation reductions for poor biosecurity, such as those introduced in Lower Saxony, led to more concealment of disease rather than more investment in biosecurity, Layer 2 would need rethinking.
And if the delays and costs of the current UK approach turned out to be negligible — if reserve funding were released as quickly as a pre-agreed facility would release it — the case for Layer 3 would rest on certainty alone.
Conclusion
Every biological emergency is eventually paid for. The question this article has asked is whether it can be paid for before it happens, in ways that make the emergency smaller, the response faster and the prevention stronger. The answer from Germany, the Netherlands, Australia and the UK’s own experience with terrorism reinsurance is that it can — not perfectly, not without disputes about who pays, but better than the alternative.
The alternative is the system the UK has now: money that is always found, always late, and never spent on the readiness that would have made it unnecessary.
Questions & Answers
What does pre-arranged finance actually do that emergency finance cannot?
Four things: it settles who pays before the crisis rather than during it, it releases money faster, it can price risk so that behaviour changes beforehand, and it removes the argument about liability from the middle of an outbreak.
Can private insurance cover this?
Only partly. It has a real role, mostly for business interruption, but correlated catastrophic risk cannot be insured privately without a public backstop — the losses arrive everywhere at once, which is precisely what private insurance cannot absorb.
Is there a cautionary example?
International pandemic finance provides one. The World Bank’s pandemic bonds did pay out, but late and at high cost, and in 2026 the Pandemic Fund faced its own funding difficulties. Pre-arranged does not automatically mean well-designed.
References
- Bayerische Tierseuchenkasse (n.d.) Entschädigungen. btsk.de/leistungen/entschaedigungen/
- Bergevoet, R., de Lauwere, C. and van Asseldonk, M. (2019) Beleidsevaluatie Diergezondheidsfonds. Wageningen Economic Research report 2019-023. edepot.wur.nl/472491
- Brim, B. and Wenham, C. (2019) ‘Pandemic Emergency Financing Facility: struggling to deliver on its innovative promise’, BMJ, 367, l5719.
- Clarke, D.J. and Mahul, O. (2011) Disaster Risk Financing and Contingent Credit: A Dynamic Analysis. Policy Research Working Paper 5693. Washington, DC: World Bank.
- Defra (2025) Contingency Plan for Exotic Notifiable Diseases of Animals in England. London: Defra.
- European Commission (2026) Final Evaluation of Regulation (EU) No 652/2014. Council document ST 7742/26. data.consilium.europa.eu/doc/document/ST-7742-2026-INIT/en/pdf
- Financial Conduct Authority (2021) ‘Supreme Court judgment in business interruption insurance test case’, press release, 15 January 2021. www.fca.org.uk/news/press-releases/supreme-court-judgment-business-interruption-insurance-test-case
- G20 High Level Independent Panel on Pandemic Preparedness and Response (2025) Closing the Deal: Financing Our Security Against Pandemic Threats.
- International Working Group on Financing Preparedness (2017) From Panic and Neglect to Investing in Health Security: Financing Pandemic Preparedness at a National Level. Washington, DC: World Bank.
- Marschik, T., Kopacka, I., Stockreiter, S., et al. (2021) ‘The epidemiological and economic impact of a potential foot-and-mouth disease outbreak in Austria’, Frontiers in Veterinary Science, 7, 594753. doi.org/10.3389/fvets.2020.594753
- Meuwissen, M.P.M., van Asseldonk, M.A.P.M. and Huirne, R.B.M. (2003) ‘Alternative risk financing instruments for swine epidemics’, Agricultural Systems, 75(2–3), pp. 305–322.
- National Audit Office (2002) The 2001 Outbreak of Foot and Mouth Disease. HC 939, Session 2001–02.
- National Audit Office (2025) Resilience to Animal Diseases. HC 946, Session 2024–25.
- Niedersächsische Tierseuchenkasse (2025) Information zu Entschädigungsleistungen und Beihilfen im Tierseuchenfall — Kürzung der Leistungen bei Verstößen, 6 October 2025. www.ndstsk.de/
- Pandemic Fund (2026) Statement from the voting members of the Governing Board on the Pandemic Fund’s accelerated support for the Ebola emergency, 29 May 2026. www.thepandemicfund.org/
- Pool Re (2025) Annual Report and Accounts 2024–25. London: Pool Re.
- Regulation (EU) No 652/2014 of the European Parliament and of the Council of 15 May 2014, Articles 5–6.
- Responsibility and Cost Sharing Advisory Group (2010) Responsibility and Cost Sharing for Animal Health and Welfare: Final Report. London: Defra.
- UK Covid-19 Inquiry (2026) Module 5 Report: Procurement.
- World Bank (2020) ‘PEF allocates US$195.84 million to more than 60 low-income countries to fight COVID-19’, press release, 27 April 2020. www.worldbank.org/en/news/press-release/2020/04/27/pef-allocates-us195-million-to-more-than-60-low-income-countries-to-fight-covid-19
- World Health Organization (2026) Contingency Fund for Emergencies. www.who.int/emergencies/funding/contingency-fund-for-emergencies
Key Takeaways
- In the UK, the cost of responding to an animal disease outbreak is met largely from Defra's budget and, when that is not enough, by claims on the HM Treasury reserve made once the outbreak is under way. Nothing is agreed in advance about who pays, how much or how quickly.
- Pre-arranged finance does four jobs that emergency finance cannot: it settles who pays before the crisis, it releases money faster, it can price risk in ways that reward prevention, and it can fund readiness as well as response.
- Germany and the Netherlands both run standing animal disease funds financed partly by compulsory levies on keepers. In Lower Saxony, the fund now cuts compensation for keepers without a biosecurity plan. The Dutch fund caps the sector's liability and the state pays above the cap.
- Private insurance has a role, mostly for business interruption, but correlated catastrophic risk cannot be insured privately without a public backstop. The UK already has a model for that backstop in Pool Re.
- International pandemic finance offers a warning. The World Bank's pandemic bonds paid out, but late and at high cost; in 2026 the Pandemic Fund had to reprogramme preparedness grants to respond to an Ebola emergency because no dedicated surge finance existed.
- We propose a layered approach for the UK: a standing animal disease fund with capped industry levies and compensation linked to biosecurity, a pre-agreed contingent reserve for severe outbreaks, and a government-backed reinsurance layer for catastrophic losses.