The diabetes typ 2 case health impact bond

Story: A health impact bond to combat type 2 diabetes 

Can a region, an insurance company and a bank join forces to promote public health? Region Stockholm, Skandia and SEB decided it was worth a try. This is how SEB came to develop a unique health impact bond, to combat type 2 diabetes. 

The type 2 diabetes case 

Type 2 diabetes is often labelled a lifestyle disease. Overweight, stress and lack of exercise are all factors that increase the risk of developing it. Over time the incidence of type 2 diabetes has increased and the disease has become more common in younger age groups. The good news is that since it is lifestyle-related, preventive measures can have a big effect.    

To be able to finance its work against type 2 diabetes, Region Stockholm opted to issue a health impact bond in 2020. The insurance company Skandia was the sole investor, while SEB was the adviser and financial arranger of the bond. 

A unique health impact bond is born 

A bond is essentially a loan, where the issuer borrows money from the investors. Hence, the issuer gets financing for a project, while the investor is compensated for the risk through interest rate.  

The health impact bond issued to combat type 2 diabetes constitutes a new form of cooperation between the public and private sector. SEB has given the bond a special feature, where the investor, Skandia, only gets interest on its money if positive health effects are actually achieved. Such effects would, of course, also enable large future cost savings for Region Stockholm. 

All in all, the bond represents a unique take on promoting public health.  

This is how the Health Impact Bond works: 

• The bond of 30 million kronor has a maturity of five years. The money will be used for preventative measures for about 900 individuals at risk of developing type 2 diabetes. 
• A health coach will develop a personal health plan for the participants. They will also receive a so-called health balance, so that they can invest in services that help promote a healthier lifestyle. 
• If the project is successful, Skandia will get a return that is somewhat higher than what Region Stockholm would have paid for regular financing. At the same time, if the diabetes incidence goes down among the participants, the county council will be able to save a lot of money. 
• If the project fails to achieve the expected health effects Skandia will receive a negative return.