Marsh gears up to expand capacity for pandemic insurance product

Marsh LLC is looking to expand available capacity to support its PathogenRX coverage, which it launched in 2018 to cover revenue lost during pandemic outbreaks.

While no contracts for the coverage had been completed prior to the coronavirus outbreak, the brokerage has seen heightened interest in the product, said Chad Wright, head of risk analytics and alternative risk transfer in the United States and Canada, for Marsh in Atlanta.

“We believe at some point, there won’t be enough insurance capacity available as it stands today, for all of the people who are interested in purchasing this coverage,” he said.

Marsh expects to have “a couple of major insurers hopefully coming onboard soon” behind lead underwriter Munich Reinsurance Co. and “others which have expressed interest,” Mr. Wright said.

In addition to traditional capacity, Marsh is examining capital markets products, such as catastrophe bonds or other insurance-linked securities, or a government backstop. “We’re working on all those things simultaneously,” Mr. Wright said.

Some of the complex calculations associated with capital markets products for pandemic risk are already used in life and health insurance industry, he said. “What is most closely linked and tied to this exposure is identical to life insurance and mortality rates. This is the one thing that can be modeled and has a result.”

Statistically, there’s some form of epidemiological event every seven years, Mr. Wright said.

The cost of the Pathogen Rx coverage is a consideration for many buyers, he said. “The rate on line is an issue for some people. It’s expensive,” even compared with just four months ago and compared with general property/casualty lines, Mr. Wright said.

Marsh is working through submissions for the coverage, which is a complex process because each coverage contract must be built from scratch for each exposure, Mr. Wright said.

“We’re working on the qualification process for the first tranche of people and then we’ll have a second tranche,” he said.

Pathogen RX was launched in 2018 by Marsh, San Francisco-based epidemic risk modeling company Metabiota Inc. and Munich Reinsurance Co. It won a Business Insurance 2018 Innovation Award.

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