Businesses around the world are facing catastrophic losses as the novel coronavirus forces them to scale back operations or shut down entirely, and most don’t have insurance cover for pandemics. Companies are now racing to buy protection against the next outbreak, insurance experts say.
Bankruptcies are expected to mount as measures to contain the spread of the virus shut down entire industries and wipe out consumer demand, revealing just how exposed the global economy is to pandemics. According to the World Bank, a severe pandemic could wipe out 5% of global GDP, or more than $3 trillion.
Despite the potential for disaster, few insurance policies cover pandemics, because the risk is not well understood and difficult to price. But now, huge interest from companies looking for protection against business interruption suggests that pandemic policies are the next big thing in commercial insurance.
Marsh, a leading insurance broker, said it is experiencing a surge in inquiries for PathogenRX, a product it launched in 2018 to provide financial protection to companies hit by an infectious disease outbreak in the United States and Asia. The product includes a policy underwritten by Munich Re, one of the world’s biggest providers of cover to protect insurers against big losses.
Sales had been slow, partly because the insurance was viewed as expensive given the risk, Christian Ryan, the head of US hospitality, sports and gaming at Marsh, told CNN Business. But the coronavirus pandemic is rapidly changing that perception, he said.
“We’re going to a see lot of development in the private insurance space to respond to this,” said Ryan. “Pandemics are the biggest risk to most industries.”
Metabiota, a San Francisco-based company that tracks and models epidemic risk, said it was approached by one hospitality company that is looking at insurance coverage in the “hundreds of millions of dollars.” Munich Re said it has received “several hundred” inquiries from insurance companies and corporate clients since the coronavirus outbreak began.