New Insurance Policies Address Income Loss From Future Pandemics

RISK BRIEF – December 2020

As insurers, brokers and regulators work to develop new solutions that address future risks of pandemics, some innovative insurance coverages are beginning to become available. Although these new solutions do not address exposures arising from the current worldwide COVID-19 pandemic, they are structured to address some of the most challenging risks for design firms from pandemics and epidemics that occur in the future.

For instance, one new policy covers non-damage business interruption – such as loss of revenue – due to an epidemic and pandemic outbreak of known or unknown origin within a defined area. With an annual premium as low as $35,000, the policy is designed for firms of all sizes with available limits ranging from $1 million to $100 million. The policy also includes access to specialized experts to assist in outbreak mitigation and crisis management.

Coverage can be tailored by company size, geographic location, and type of business. At the same time, coverage triggers can be based on specific loss scenarios identified by the insured in the application along with the number of fatalities, the declaration of a “Public Health Emergency of International Concern” by the World Health Organization (WHO), or an option to require both the WHO declaration and a government- ordered lockdown.

The new policy covers future outbreaks of known diseases such as Ebola and coronaviruses, as well as unknown newly emerging viral diseases. An optional add-on coverage module for variants of influenza such as Swine Flu or Avian Flu is also available.

Use care in evaluating new insurance policies. While this program and other emerging solutions like it may help employers address non-damage business interruption exposures arising from future epidemics and pandemics, design firms considering applying for coverage should work with an experienced insurance broker. Furthermore, keep in mind these emerging insurance policies are new and untested. Thus, there’s currently limited competition to mitigate pricing, as well as questions about how many claims may arise when an insured event occurs and how they will be handled.