(Bloomberg) -- Munich Re and Marsh & McLennan Cos., the largest insurancebroker by market value, introduced a product to insure U.S.pharmaceutical companies against regulatory actions that couldcause them to suspend manufacturing.

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The product would cover as much as $10 million in non- damagebusiness-interruption costs tied to violations of federalmanufacturing standards, Munich Re said Wednesday in a statement.The Munich-based company is the world’s biggest reinsurer.

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“The question is always, ‘Where do you find kind of the nextblockbuster?’” Claudia Hasse, head of special enterprise risks forMunich Re, said in a phone interview. “We saw that this is really ahuge danger for pharmaceutical companies.”

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Traditional business-interruption insurance covers losses tiedto events such as fires or natural disasters. The new coverage fromMunich Re and New York-based Marsh protects against income lossfrom shutdowns like the one Johnson & Johnson’s McNeil-PPC Inc.experienced in 2011. The U.S. Food and Drug Administration barredthe company from making drugs at a Pennsylvania plant because itfailed to comply with manufacturing standards.

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“There is a need for this product as inspections that result ina suspension of manufacturing, whether voluntary or enforced, canbe extremely costly for life-sciences companies,” Loretta Worters,vice president of communications at the Insurance InformationInstitute, said in an e-mail. “FDA-mandated manufacturingsuspension isn’t typically covered by traditionalbusiness-interruption insurance, because the event doesn’t stemfrom physical damage to the insured’s property.”

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--With assistance from Anna Edney in Washington.

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Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.

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