Finding insurance solutions for a global vaccination campaign

The UK’s race to vaccinate the population against the coronavirus is well underway, which means the country may soon be back to, at least some degree, of normality. But with a number of different variants already discovered and more expected to emerge, the war against the coronavirus will only truly be over once the global population has been vaccinated. This is the challenge that members of the Global Health Risk Facility (GHRF) sought to solve when the initiative started to gain momentum early Q2 2020.

However, even prior to the pandemic, the distribution of vaccines and medication across the globe, particularly to the emerging economies, had already preoccupied the minds of many of the members of the Facility. Developing countries have much lower insurance penetration and risk management support compared to countries like the UK and US, which makes successful transportation of these lifesaving commodities even more important in the midst of a global pandemic. Political instability, limited technology, high costs and navigating some of the weakest supply chains in the world also means greater risk for the insurers and of course the ultimate recipients of the vaccines. This is one of the reasons why global insurers have typically shied away from this area of the market, leaving it to governments and their own local insurance markets to facilitate the movement of vaccines within country.

Many of the Covid-19 vaccines pose more particular problems for manufacturers and their insurers. Quality assurance is fundamental and cannot be compromised. The Ultra Cold Chain requirements for several of the vaccines are a prime example of the logistical challenges that will test the most sophisticated and technology enabled supply chains, before contemplating how the developing countries will cope with the required stringent temperature-controls. In addition, scarcity of air cargo capacity and generally poor infrastructure in certain regions are challenges that require considerable thought and planning. With no available data on distributing Covid-19 vaccines, and limited specialised packaging, there is a real product risk if countries do not receive the required financial support and risk management expertise.

Risk of theft

What’s more, unlike any other vaccine, there is both unprecedented demand and a different risk profile for a Covid-19 vaccine. It is a highly sought after product. We’ve already heard reports of cyber-attackers trying to disrupt the supply chain or simply attempting to steal the intellectual property on the vaccine’s make-up. Indeed, the whole supply chain, from production through to distribution is rife with cyber risks.  A priority for both the vaccine manufacturers and countries is to ensure that the vaccine stays in its appropriate temperature, is not delayed and reaches its rightful recipient without being compromised. This in itself requires significant co-ordination of multiple networks and systems, of which there is seldom a singular point of oversight. And the distribution chain is only as strong as its weakest information, technology, or security link. So, as the world embarks upon the largest and most expensive vaccination campaign in human history, for this to be successful will require unparalleled data connectivity, increased Risk Management focus, combined with a truly collaborative approach from manufacturers right through to logistics companies, governments, ministries of health and insurers.

The role of insurance

Insurance and risk management techniques can and will allow for the distribution of the vaccine across the world. Most major pharmaceutical manufacturers already have global insurance placements, often with captive participation, that will enable them to include Covid-19 vaccine distribution and rollout without much additional complication. The same can be said for logistics companies. Any potential impact on premiums can only be assessed depending on the outcome of a variety of different factors. Two obvious examples include the success or failure of worldwide distribution, and any resultant claims, and secondly, the liability exposure that logistics companies are asked to assume for Covid-19 versus their current limited liability model.

The glaring gap in the existing solution is the in-country risk, particularly for the lower to middle income countries. Upon the vaccine or goods entering a country, the manufacturer’s insurance policy will often terminate and thereafter the responsibility for covering the distribution and storage risks resides with Ministries of Health or Governments. For reasons already explained, this is when the quality of the vaccine and/or risk of loss is at its most perilous state.

This is exactly the gap and solution the Global Health Risk Facility was designed to fill. The GHRF is an alliance of insurance and technology partners, which in anchored by Syndicate 1796, the first public-private partnership to address a global health emergency in Lloyd’s 330-year history. The Facility makes available billions of dollars of insurance coverage, together with risk mitigation services to help protect and facilitate the global distribution of the Covid-19 vaccines. A critical feature of the Facility is the provision of better data and risk management solutions allowing the vaccine to be tracked and monitored throughout its distribution journey. This will help to ensure the vaccine makes it to its destination and is useable on arrival.

The fight against the coronavirus pandemic is a global fight and requires all of us to come together, this is why we, at McGill and Partners, are proud to have been part of the formation of the Global Health Risk Facility. It is a true testament to the agility and innovation within the insurance industry that this vaccine distribution challenge has been met with speed and at scale.

Kevin Rimmer is Head of Cargo at McGill and Partners

Kevin Rimmer

Head of Cargo

McGill and Partners

Kevin.Rimmer@mcgillpartners.com

McGill and Partners is a boutique specialist (re)insurance broker focused on clients with complex and/or challenging needs. Launched in 2019, with significant backing from Warburg Pincus, McGill and Partners is headquartered in London and has an international presence in Ireland, New York and Miami. For more information visit https://www.mcgillpartners.com