In addition to policies specifically designed to pay for loss of business income during a pandemic flu event, other specialty insurance coverages–such as medical malpractice and directors and officers liability–may be tapped to pay flu-related claims, according to a report published late last year.
The October 2008 report–"Pandemic – Potential Insurance Impacts," prepared by the Emerging Risks Team at Lloyd's–not only provides facts and figures on past pandemics, but also gives a line-by-line discussion of potential insurance impacts of a future pandemic.
The report concludes that:
o A pandemic is inevitable, given historic recurrence rates of 30-to-50 years.
o Economic impacts may be significant, with a repeat of 1918 Spanish flu likely to cause a global recession with estimated impacts ranging from 1 percent to 10 percent of global GDP.
o There will be insurance losses for lines other than life and health.
The report provides the following insights regarding specialty lines of insurance:
o D&O liability
"One might conclude that any company that did not properly plan and was disproportionately financially impacted, when compared to [its] peers, may see [its] directors sued for loss of shareholder value."
o Medical Malpractice
There are few, if any, spare beds in hospitals, which might need to allocate 30 percent of available beds to flu cases during a pandemic event. "Who goes home? How do doctors decide?" the report asks, noting that inconsistencies between medical centers could prompt med mal claims.
o Marine
"If a ship has been at sea for longer than the incubation period of the illness and has no cases of pandemic sickness, it is likely to be free of the pandemic. If the ship then docks in a region known to have the pandemic and passengers become ill, the action of docking might be deemed to be the cause of their illness."
"Should the captain have checked before docking? Were procedures faulty?" the report asks, in one of several examples highlighting a potential marine liability scenario.
"Typically cruise ship passengers are wealthy individuals, so claims could be large," the report adds.
o Product Liability
"If it could be established that a faulty air conditioning system exacerbated the spread of the pandemic through an office building [or] aircraft…, this could lead to a class action against the manufacturer under a GL/Products policy," the report speculates.
o Travel Insurance
According to the Lloyd's report, travel insurance policyholders can present claims for lost deposits or other costs if they have to cancel a trip because they or close family members are ill. And if illness strikes while the travelers are abroad, coverage is provided for hotel costs and medical expenses until the policyholder is fit to travel or released from quarantine.
"The conditions for claims are presumably far more likely to be triggered during a pandemic and could give rise to many more claims than expected," the report says.
While the report suggests that such claims "are unlikely to cause significant solvency problems for large, diversified insurers," it concludes that "it is possible that the profits from this line of business would take many years to climb back into the black."
o For More Information:
The full report–which also discusses impacts to life/health, more standard p-c lines like general liability and workers' compensation, as well as the credit and political risk segments of the insurance business–is available online at //www.lloyds.com/NR/rdonlyres/AFDA2B40-DAD7-4E15-8DAD-7838ED165A1E/0/ER_Pandemic_InsuranceImpacts_V2.pdf
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