Is Pandemic Insurance the Answer?
Two years before Covid-19 became a brutal reality in the United States, global insurance broker Marsh created an insurance product called PathogenRX. It was designed to provide “financial protection to businesses” that wanted to address growing risks surrounding outbreaks, epidemics, and pandemics.
“The problem is that nobody bought it,” says Steve Christenson, a Minneapolis-based senior vice president with Marsh subsidiary Marsh & McLennan Agency (MMA). “Nobody really felt that the risk was there and was worthy of the premiums.”
PathogenRX, Christenson says, was targeted to hospitality and gaming, travel and tourism, aviation, and sports and events—precisely the industries that have suffered the most from the coronavirus. If companies had purchased PathogenRX, they would have paid special premiums on top of what they normally pay for property insurance. In effect, he explains, they would have roughly doubled the cost of their property-related insurance coverage.
In his role with MMA, Christenson and team advise companies on how to evaluate policies. Now, companies may want to buy PathogenRX. But, Christenson says, “nobody wants to insure a burning building.”
Meanwhile, Christenson says, businesses are looking for insurance reimbursement in the short term. “The No. 1 area where business owners are attempting to recover on their traditional insurance policies would be the property insurance policy,” he says, “specifically the business interruption feature.”
When policies exclude coverage of virus claims, those policyholders won’t get paid. Christenson says he’s aware of some large companies getting virus-related payments from their property insurance, but the payments are capped. He says the message from insurance carriers is: “Your full limit is not available in this scenario, but we will give you a small piece of it. You can collect up to $1 million for this pandemic event.”
Christenson says Marsh, which owns MMA, is asking the federal government to forge a financial partnership, so insurance companies can afford to pay claims on future pandemics. Because of the scale of the potential damage, he says, “How do we finance this risk as a society if it happens again?”
What the insurance sector seeks with pandemics is similar to what occurred after the 2001 terrorism attacks. Congress approved legislation that made terrorism coverage available to businesses, with the government sharing the losses on commercial coverage if another foreign terrorist attack occurred.
Read more from this issue
This story appears in the Aug./Sept. 2020 issue with the title “What Pandemic? You’re Insured!”