Ebola: Insurance's new way to deal with an outbreak

A custodial worker wears a mask and eye protection to guard against the Ebola virus as he prepares to clean Ruth Cherry Intermediate School in Dallas.
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A custodial worker wears a mask and eye protection to guard against the Ebola virus as he prepares to clean Ruth Cherry Intermediate School in Dallas.

Ebola outbreak? They've got you covered.

A unit of Lloyd's of London this week began underwriting two different forms of insurance in response to the spread of the virus.

One will provide business-interruption insurance for health-care facilities that shut down or lose money because of a quarantine related to diseases such as Ebola or the Enterovirus.

The other will provide business-interruption coverage for any business that faces a government-ordered shutdown due to the presence of Ebola.

Both plans are being offered by the Ark Syndicate unit of Lloyd's.

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"Hospitals, hotels, airports, shopping centers, restaurants, theaters, gyms and any place the public may congregate including apartments and habitational units are probably most at risk," said Ark Syndicate's Richard Bryant.

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The offerings come as Marsh Inc., a division of risk management firm Marsh & McLennan, noted in a report published Friday that "property and business interruption [BI] policies are typically triggered only in the event of direct physical damage to or loss of an insured's property as a result of a covered peril."

But most policies that cover instances related to communicable disease contamination only require a government agency to legally bar access to a location for an "actual," not "suspected" presence of a communicable disease.

"This means that without special provisions . . . health care providers' property insurance and BI policies would likely not be triggered based solely on the presence of Ebola," the report said.

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NAS Insurance Services already has fielded several inquiries about the business-interruption coverage for various companies that are being underwritten by Ark Syndicate.

"It has generated quite a buzz," said Jeremy Barnett, senior VP of marketing as NAS Insurance, which specializes in niche products. Barnett said he has heard from property management companies, hospitals and other health-care facilities, hotels, schools and summer camps.

NAS Insurance so far has not issued any of the new policies, but is reviewing a number of applications for the coverage, which would provide a benefit of up to $50,000 per day for the covered business. Cost of coverage would depend on the nature, size, location, revenue and other aspects of the firm, Barnett said. NAS is offering the coverage in conjunction with Prospect Insurance Brokers.

The Pandemic Disease Business Interruption Insurance being offered specifically for health-care facilities is being marketed by Miller Insurance Services and William Gallagher Associates, with underwriting from Ark Syndicate.

"The need for this coverage is acute at a time where Ebola and the Enterovirus threaten the operating capacity of global health-care facilities," said Mark Sleet, professional risks broker at Miller.

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Prices for the new forms of Ebola-related coverage were not disclosed. But Nadine Silva, executive vice president of the Lexington Insurance unit of AIG, said, "I'm guessing the new products are pretty pricey."

She added, however, the price could come down over time.

"The price points on terrorism insurance when it first came out were very different than it is today," she said.