Covid-19 Idea Pulse Alerts: Week 7

INSURER ACTIONS BETWEEN JULY 25 AND AUGUST 7, 2020

The Idea Pulse series on COVID-19 monitors innovations and insurer strategies that are being shaped in response to the continuing pandemic. These are some of the noteworthy developments across the global insurance industry in the fortnight of July 25 to August 7, 2020.

Pandemic Insurance

US-based bespoke risk broker Elite Risk Insurance is offering Elite Outbreak, an insurance program for pandemics that specifically includes coverage for a COVID-19 relapse. The product has been developed jointly with an undisclosed captive insurance partner. Premiums range between 8%-15% of coverage with limits from $2 million to $25 million.

According to Elite Risk’s website, the plan covers perils such as business interruption, cast coverage for film and television, receivables due to bankruptcy of buyers, regulatory change and civil authority, supply chain disruption and reputation repair or brand rehabilitation. Coverage is triggered when businesses are required to comply with state or local government shutdown requirements. The program is targeted towards retail, entertainment, dining and hospitality as well as manufacturing businesses.

Another US-based national wholesale insurance broker, One80 Intermediaries is offering Pandemic Protector, a “first of its kind”, pandemic and epidemic coverage for future outbreaks. According to One80, the coverage includes non-damage business interruption and crisis management for known outbreaks such as Ebola and coronaviruses, as well as unknown newly emerging viral diseases. Premiums start at $35,000 with limit options upwards of $1,000,000.

A key feature: Policies are occurrence based followed by a 12-month window which client can choose as an indemnity period. As a result, clients can be covered for losses that materialize after the end of the policy period. Pandemic Protect is being offered to SMEs and large enterprises, middle market clients as well as governments. Other target segments include retail, hospitality, tourism, mining, construction and manufacturing. Pandemic Protector is reportedly underwritten by the London market.

The availability of pandemic insurance is welcome news for businesses. Pandemic insurance, as we reported earlier was available before COVID-19 but had few takers. Tennis event Wimbledon and Shaw Festival, an arts and theatre production in Canada’s Niagara-on-the-Lake were some of the rare exceptions. Event organisers had purchased pandemic insurance and received payouts helping them tide over financial losses brought on by COVID-19.

Individual and Group Products

Travel and tourism operators are doing their best to nudge travellers to resume planned travel and holidays offering COVID-19 coverage, even for free in some cases such as Emirates airlines. Tourism dependent economies in Europe have also joined in. Portugal’s national tourism authority Turismo de Portugal has launched a travel insurance scheme for foreign tourists. The plan includes Covid-19 medical expenses and cancellation, interruption or extension expenses due to the pandemic. Besides, tourists can sign up for a free Health Passport through which they can obtain a test for Covid-19, if so required, at pre-determined rates at healthcare networks in the country.

Affordable, short term health products created specifically for COVID-19 risks have proved to be extremely popular. IRDA, India’s insurance regulator had developed blueprints for two product variations – an indemnity and another fixed benefit plan to be sold by national and private insurers, with uniform policy wordings, from July 10. The response has been phenomenal, with insurers selling anywhere between 300-3,000 plans daily in the three weeks between July 10 to July 30.

India currently ranks third among the worst affected countries by the pandemic and this has prompted many first-time buyers taking up cover. Health insurance policies in India already cover COVID-19, however, the growing outbreak has led to customers buying the short-term plans to include all family members and for services such as home treatments. Millennials form a large section of new purchasers and demand is driven from large and mid-tier urban centres that account for a majority of the cases.

Even after the COVID-19 pandemic passes, working from home may remain a part of every employee’s workweek and expectations. Many organisations are planning to make this model a permanent feature of their operations. After launching group and individual work from home products in Singapore, Chubb Asia has now introduced a work from home group insurance plan in Hong Kong and SAR with similar features – covering ergonomic injuries, accidents, damages, counselling and even accidents such as serious burns sustained while cooking.

Work from home insurance is another example of new needs in the new normal. Currently, there is the uncertainty of coverage of risks such as damage or theft of business equipment, and other workplace hazards when working from home. In the UK, for example, general insurers, through industry body Association of British Insurers (ABI) pledged to cover policyholders working from home during the lockdown under their existing home insurance plan, without requiring customers to inform their insurers. This pledge will be reviewed on September 1 this year but there is uncertainty if coverage will continue if the lockdown eases. Hopefully, other insurers are following in Chubb’s footsteps and work from home insurance will be available soon.

Insurtechs

In May, insurtech Praedicat, product risk analytics and liability modelling company for casualty insurers, reinsurers and global industrial companies, launched a US court liability tracking data tool, for evaluating the impact of COVID-19. The tool aims to assist casualty insurers in managing their exposures to litigation losses to factor into reserving and underwriting. Praedicat reported in late July that over 200 complaints have been already filed in U.S. courts, alleging corporate defendants are responsible for introducing and spreading SARSCoV-2 in the United States.

The tracker allows users to identify industries most vulnerable to COVID-19 litigation, with significant clusters of complaints in hospitals, meat packing facilities, restaurants, and warehouses – 55% related to cruise ships and nursing homes alone. Praedicat’s tracker is also capturing D&O exposures from shareholder actions alleging corporate officers breached their fiduciary duty during the pandemic. The long-term plan for the litigation tracker is to capture other emerging casualty-relevant litigation in its earliest stages so that clients can track how litigation events unfold over time.

Millions of American workers face financial and health risks after simultaneously losing jobs and employer-provided health insurance. Sidecar Health, a digital health insurance start-up which raised over $20 million in its latest funding round in July has an innovative solution to provide consumers with affordable health insurance. Unlike traditional insurance, which sits between the patient and the doctor, members pay for care directly when they get it using the Sidecar Health Visa card.

Sidecar Health allows its members to take advantage of doctors’ discounted “self-pay” or “cash” rates, saving members 40% compared to traditional insurance. Sidecar Health’s members can comparison shop for care as they would for any other product or service, bringing market forces to healthcare that will ultimately lower costs. The plans offered by Sidecar Health provide coverage that includes 170,000 medical services and prescription drugs.

Sidecar memberships have tripled in 2020. The insurtech’s ambition is to eliminate $1 trillion in healthcare waste annually.

Lloyd’s Lab Fusion programme was conducted between July 21-23, with previously selected partner insurtechs Hivemind, Geollect, RYSKEX and Survenus. The program was designed to provide a setting for Lloyd’s market teams to work with Insurtechs to explore and develop early-stage ideas for tackling pandemics and systemic risk. Three solutions were presented around COVID-19 and pandemic risk management while the winning solution was designed around a parametric solution for national power grid failure.

Geollect’s solution measures real-time exposures from cruise ships that are held up at ports due to COVID-19 travel restrictions in areas liable to tropical storms. Hivemind used Agora, it crowdsourced market prediction platform to evaluate the number of COVID cases in the US as a proxy for a pandemic severity indicator.  Survenus developed a platform combining high-quality, near real-time global data on the spread of infectious diseases which can be used to price and model pandemic exposure.

RYSKEX, the event winner, designed a parametric insurance solution for a specific systemic risk – widespread, long-lasting power outages in the US power grid.

Pandemic Reinsurance Pools

Alongside proposals from the UK and US, European institutions are also taking steps towards public-private reinsurance pools for pandemics. Eurochambres, the European organization of Chambers of Commerce and Industry representing more than 20 million businesses – of which over 93% are small and medium-sized (SMEs) – across 43 different European countries, has entered a Memorandum of Understanding with insurer Generali under which they agreed to cooperate to promote and implement a potential ‘Pandemic Risk Pool’ against future pandemic risks. The participation to the ‘Pandemic Risk Pool’ project is expected to be broadened to involve European institutions, EU Member States and other leading European players in the creation of Public-Private Partnerships and mechanisms that will provide a buffer against future risks.

The plans for a potential ‘Pandemic Risk Pool’ follow Generali’s contribution to address the Covid-19 emergency through the Extraordinary International Fund of €100 million and the Recovery Plan for Europe launched by the European Union at the end of May 2020.

In late July, the European Insurance and Occupational Pensions Authority (EIOPA) also published an issues paper seeking views on options proposed for developing shared resilience solutions for pandemic risk. EIOPA consulted the insurance and reinsurance industry, as well as commercial insurance buyers and insurance brokers and distributors to develop the paper.

As with other proposals, the paper explores ideas for public-private partnerships, for example, establishing an EU-expert group for data sharing and risk modelling, and creating a platform for public and private coordination on prevention measures. There are four key framework elements identified – proper risk assessment, risk prevention and adaptation measures, appropriate product design, and risk transfer. The options include different insurance models and coverage, for example, whether cover should be mandatory, and whether payouts should be based on a pre-agreed parameter or index.

The Federation of European Risk Management Associations (FERMA) has endorsed EIOPA’s proposal. FERMA had, in May, called on the European Commission to create an EU resilience framework for catastrophic risks to address the lack of coverage available for financial losses resulting from non-physical damage business interruption (NDBI). The association had noted that there is currently “little to no insurance coverage” available for financial losses from NDBI in case of catastrophic risks, such as the current COVID-19 pandemic.