Axis to cover hospitals for pandemic losses
Bermuda-based Axis Capital Holdings Ltd has launched a new insurance policy to cover hospitals against deadly pandemics.
The coverage — a first for the industry — will cover hospitals in US and Canada against major outbreaks of contagious diseases, including known illnesses and those yet to surface and also diseases which could mutate into a pandemic in the future.
Kimber Lantry, head of Axis’ healthcare, said the new coverage was sparked by cases like the Texas hospital which saw a massive drop in income in 2014 as potential patients were scared away following the admission of an individual suffering from the killer Ebola virus.
The Texas Presbyterian Hospital lost $20.3 million in revenue over a two-month period, with a fall of 22 per cent in inpatient days and a near-50 per cent drop in emergency room visits.
Mr Lantry said: “Our new medical catastrophe business interruption and extra expense coverage serves a critical need in the healthcare marketplace that has thus far gone unaddressed by the insurance industry.
“Pandemics represent an especially serious risk for healthcare providers.”
During the severe acute respiratory syndrome (SARS) outbreak in 2003, hospitals were identified as a major source of the spread of infection, which resulted in the partial or complete shutdown of three hospitals in Canada.
Mr Lantry said, however, that using data the frequency of pandemics could be estimated, with bubonic plague, the Black Death of the Middle Ages, breaking out every 10 to 30 years since it first surfaced around 1350 until modern medicine found a cure.
Similarly, serious outbreaks of influenza have occurred 31 times over the last 300 years.
He explained: “Pandemics have a surprising parallel with earthquakes when it comes to predictability.
“We built a model that looked at frequency, how long they lasted and the severity — the impact on revenue for hospitals.”
Mr Lantry, however, said there were unknowns, including the impact of worldwide air travel on how fast diseases travelled and the development of superbugs, which are resistant to antibiotics.
He added: “The real issue, the ultimate fear, is a disease, a pandemic, which is transmitted airborne and has a high level of mortality.”
Mr Lantry said that the coverage would be triggered by four eventualities — a government quarantine of a hospital, if 25 per cent of staff do not turn up for work, if there is a 25 per cent or more reduction in inpatient stays or a 25 per cent or more fall in emergency room visits.
Coverage, however, will be limited to a total of $50 million in any major metropolitan area and to a maximum of $750 million across the country.
Hospitals who want coverage will also have to undergo an Axis assessment of their pandemic preparedness, carried out by an Axis expert in the field.
Mr Lantry said: “We have to protect ourselves and our reinsurers against risk aggregation.”
He added that other insurers had offered more limited products in the past, but that the Axis coverage was the most comprehensive.
And he said: “We’ve gotten a lot of interest as we’ve been putting this out in the marketplace. Hospitals have recognised, when they saw the hits to this hospital in Dallas, they have to take patients in — they can’t turn them away.”
And Mr Lantry added: “Talking to doctors and healthcare professionals, there is a view that pandemics will become more prevalent.”
Peter Wilson, president of Axis Insurance operations in the US, said: “The healthcare industry is an important market for Axis Insurance and we are committed to applying our specialty underwriting expertise, service capabilities and capital strength to provide innovative and competitive solutions like this one.”
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