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Insurance Industry Innovates with New Pandemic-Related Products

Most of what we’re reading about regarding the pandemic and the insurance industry involves the potential for litigation. But just as with any other major event and disruption that occurs, there is also an opportunity for individuals and companies to innovate. This is exactly what the insurance industry is doing, as evidenced by the number of announcements we’ve seen on how carriers, InsurTechs, and others are creating new pandemic-related products and tools.

Business Interruption for Pandemic-Related Losses

National wholesale broker and program manager One80 Intermediaries (One80) has created an exclusive policy, Pandemic Protector, providing non-damage business interruption insurance for loss of income due to an epidemic and/or pandemic outbreak. Underwritten in the Lloyd’s market, the policy is designed for all companies of all sizes – accessible for small to mid-sized businesses with lower limit offerings, yet also suitable for Fortune 500 companies with limits that go as high as $100 million. The policy will cover future outbreaks of both known and unknown diseases; however, needless to say, it will not respond to the current outbreak of COVID-19.

Bermuda and London-based insurer Convex is looking to launch coverage for one of the areas worst hit by the current crisis – event cancellation.

Lloyd’s Lab Fast-Tracks InsurTechs with Pandemic Products

Lloyd’s recently announced that it has reimagined and expanded the scope, process, and timing for new applicants to the Lloyd’s Lab innovation accelerator amid the coronavirus. Three teams were selected for its COVID-19-related Lloyd’s Lab program, which began in mid-July.

  • Metabiota: Focuses on quantifying and mitigating epidemic and pandemic risk by drawing on epidemiological analysis and a wide range of analytic tools to advance the science of modeling infectious disease outbreaks and estimating their socioeconomic effects.
  • Praedicat uses litigation data and science combined with technology to anticipate the next big liability catastrophe. Plans are to develop a suite of cross-line clash COVID-19 scenarios to assist the insurance market in identifying and tracking the emergence of COVID-19 liability risk.
  • Dialogue focuses on the Credit and Political Risk Insurance (CPRI) marketplace, and is developing an online platform between brokers and underwriters to create, submit, negotiate, and place complex CPRI transactions. Dialogue has also created a centralized application to help brokers see underwriter availability, as working from home has become the new norm.

Insurer-Government Partnership

The pandemic also provides the opportunity for insurers to work with governments to find innovative insurance products based on public-private partnerships and similar to some of the terrorism-related products that already exist. Chubb, for example, in early July released a plan proposing that insurers and the U.S. government work together to cover future business-interruption losses from pandemics amid the plethora of lawsuits arising from COVID-19. Chubb’s plan for businesses with fewer than 500 employees would provide assistance quickly, to help cover “their immediate cash needs.” A separate program for larger businesses would rely on a government reinsurance entity, and businesses would pay an “appropriate” price for the risk to both the government and insurers.

Farmers Insurance CEO Jeff Dailey in a statement to Bloomberg said that many insurers could help administer a program such as the one Chubb is proposing, though the government needs to be the primary backer.

The insurance industry is well-positioned to leverage its innovation, creativity, experience, and insights to develop new pandemic-related products and services to help keep businesses resilient in the face of adverse events. We look forward to providing you with updates on this front.