Global broker and risk consultancy Marsh has launched PathogenRX, an insurance product designed to protect businesses against pandemic risks such as the outbreak of infectious diseases, that utilises a parametric trigger provided by epidemic risk modeling specialists Metabiota and capacity from reinsurance giant Munich Re.
The impact of infectious disease outbreaks and other pandemics can be significant for businesses, ranging from direct impacts to extensive business interruption, which makes a parametric triggered event definition and risk transfer solution, backed by global reinsurance capacity a valuable product for corporate risk managers.
Of course this also meets the mandate of the major reinsurers such as Munich Re, bringing their reinsurance risk capital direct to the corporate market through such arrangements, while also helping to narrow an evident gap in traditional re/insurance protection.
Marsh said the solution can help to minimise financial losses caused by the outbreak of pandemics, citing the PathogenRX product as the “world’s first integrated risk solution for measuring and protecting against economic impact of infectious disease outbreaks.”
The insurance product will be offered to U.S. based companies, but can also protect their global operations as well. An attractive prospect for corporate risk managers for whom the impacts of epidemics and pandemics could be significant.
“Pandemics and epidemics are not your average risk. They may occur over several months, are often not confined to a specific region, and their unpredictability means they can scale, grow, and become quite costly to a range of businesses from hotels and restaurants to schools and airlines,” explained Martin South, President of Marsh’s US and Canada Division.
Marsh highlights that disease outbreaks such as Zika, MERS, and SARS can cause a significant financial impact to businesses and even whole industries that depend on the free movement of people, without fear for safety or health.
Citing data from a study, Marsh noted that as many as 90% of Miami, Florida businesses in an area that was badly affected by the 2016 Zika virus outbreak suffered a revenue and profit loss of as much as 40%.
Historically, businesses have not been able to measure the potential economic loss from a pandemic or epidemic, or effectively protect their bottom lines using insurance. Something this new product will now help them to do.
Working in collaboration, Marsh, Munich Re and Metabiota developed PathogenRX, which they call a fully integrated pandemic risk solution.
It uses triggers such as Metabiota’s new Pathogen Sentiment Index, which the epidemic risk specialists launched recently, as reported at the time by our sister site Reinsurance News.
This Index offers insight and analytics into infectious disease outbreaks, helping businesses to model their potential financial exposure to an outbreak and protect against this risk using insurance policy underwritten by Munich Re.
These policies can be highly customised, so as to tailor coverage for specific expenses, geographies, types of disease, or portions of a calendar year, Marsh explained.
“Metabiota’s mission is to make the world more resilient to epidemics and to accomplish this means working with insurance industry leaders, like Marsh and Munich Re, to develop new offerings to minimize the economic repercussions that can result from infectious diseases,” Bill Rossi, CEO of Metabiota said. “Our Pathogen Sentiment Index combines our team’s in-depth scientific knowledge with a novel way to measure the potential impact to consumer travel and spending as a result of an outbreak and trigger the necessary resources to offset it.”
“With PathogenRX, we are pushing the boundaries of insurability. Businesses now can better prepare for the potential of an epidemic or pandemic with a highly customizable risk modelling and transfer solution,” added Gunther Kraut, Head of Epidemic Risk Solutions at Munich Re. “This joint effort is an important part in our continued strategic push for innovation. It will pave a new frontier for the insurance industry by helping businesses become more resolute to the evolving health threats facing the world.”
Christian Ryan, US Hospitality, Sports and Entertainment Leader at Marsh and based in Dallas, explained to Artemis that the use of parametric triggers will mean payouts can be determined much more quickly, while coverage can be tailored to the needs of the insured.
The global nature of the product means that international businesses, such as in the hospitality sector, can attain coverage that could provide rapid pay outs to help their finances when business interruption, or expense due to the outbreak of diseases occur.
The product is another good example of parametric triggers enabling gaps in insurance protection to be filled efficiently, while pay outs can be disbursed more rapidly as well.
The product will use the parametric factors for definition of an event, but unless a cedent has an identifiable financial loss from the event a payout wouldn’t be made, we understand.
Hence the Metabiota index is an element of the overall payout trigger, but vital for identifying when an event qualifies under the terms of the insurance arrangement.
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