Covid vaccine ~ Lloyds Syndicate 1796

Marine Cargo Insurance is – providing insurance coverage for goods in transit from one place to another.  The pandemic has brought the World to its knees, the Nation has been under lockdown since Mar 24,2020 – there are many other parts of the globe which have kept people isolated in trying to curb the dreaded virus. That also meant hampering the economy – many production units shut down, naturally the movement of goods has thinned too – and that way lesser prospects for Marine Cargo Insurers.  Now the same pandemic offers a big business opportunity for Marine Insurers is what this post is about !

Tamil Nadu Chief Minister Eddapadi K Palaniswami launched a free mask distribution scheme that will benefit over 69 lakh families in the first phase as part of measures to fight COVID-19. Meanwhile, as many as 6,993 new Covid-19 cases and 79 deaths were recorded in Tamil Nadu Monday, taking the state’s tally of cases to 2,20,716 and deaths to 3,571. Cases in the state crossed 6000 for the fifth consecutive day.  Chennai recorded 1138 fresh cases Monday and as many as 1821 persons were discharged. The city has reported 95,857 cases till date.

The Q uppermost in everyone’s mind is – when will this end ? – and more immediately, will it continue in Aug 2020 also.  Lockdown with relaxations, currently in force across Tamil Nadu, is likely to continue until August-end is what sources say, whether you like it or not. While further relaxations could be considered, when Chief Minister Mr. Edappadi K Palaniswami holds discussions with district collectors on Wednesday, the ban on public transport as well as malls and cinema halls will remain in force, official sources said.

1796 is a Special number at least for the Insurers !!

Empress Joséphine  ( Joséphine de Beauharnais )  was the first wife of Napoleon and the first empress of the French after he proclaimed himself emperor.  She was a   great lover of the arts.  Her marriage to Napoleon was her second; her first husband, Alexandre de Beauharnais, was guillotined during the Reign of Terror, and she was imprisoned in the Carmes Prison until five days after his execution. Her two children by Beauharnais became significant to royal lineage.   Because she did not bear Napoleon any children, he divorced her in 1810 to marry Marie Louise of Austria. They were married on 9^th Mar 1796.

In signing a $2 billion deal to supply their experimental coronavirus vaccine to the U.S., Pfizer Inc. and BioNTech SE are setting a price ceiling of less than $20 a dose that will impact how much other companies can charge to protect people from Covid-19.  Pfizer’s $19.50 (Rs.1460/- approx.)  price-point takes into account the “public health requirements during the pandemic,” said Sally Beatty, a Pfizer spokeswoman. The companies are pursuing a two-dose regimen of one of its vaccine candidates, and the roughly $40 course, Beatty said, is “almost 30% less than what others charge for a seasonal flu vaccine.”

Governments worldwide are seeking to blunt a pandemic that’s killed more than 600,000 people, and dozens of companies are wrestling with how to price future vaccines. Rival drugmakers are unlikely to exceed the $20 price tag unless they can deliver a product that’s more effective, has fewer side effects or that doesn’t need as many doses, particularly those developing candidates based on so-called messenger RNA technology, such as Moderna Inc.   “If this vaccine prevents disease after one use, we calculate a windfall of more than $15 billion revenue for Pfizer,” Sam Fazeli, a Bloomberg Intelligence analyst, said in a note. “We believe this sets the top price for a vaccine, with lower prices elsewhere. Need for repeated use would be the game changer.” The agreement has implications for companies like Moderna, whose investors see a significant financial opportunity.  Pricing a Covid-19 vaccine is far different than other products because of the potential demand and value, Pfizer Chief Executive Officer Albert Bourla said in June at a conference.  “If we try to calculate the value of the vaccine for the pricing like any other vaccine,” through common market principles, Bourla said, “it would be unethical.”

The U.S. deals have stoked concerns that other countries, especially poorer regions of the world, will be left behind. Other rich countries, such as the U.K. and those in Europe, have also secured deals. The U.S. typically pays “the high water-mark price” when it comes to pharmaceuticals, according to Loncar. It’s likely that the U.K and other countries are able to secure the still-experimental vaccine for lesser sums, he said. The U.S. in May pledged as much as $1.2 billion to AstraZeneca to help make Oxford’s Covid vaccine, and the government has backed projects underway at Johnson & Johnson, Moderna and other companies.

Insurance market Lloyd’s of London is to start offering cover for the delivery of potential Covid-19 vaccines, in a move designed to transport them safely to low-income countries. Vaccine delivery can be difficult or expensive to insure, with underwriters wary of the risk that the medicine can be ruined en route to the final destination by getting too hot or too cold. Freezing is a particularly big risk. One academic study found that 37 per cent of vaccines in low-income countries were exposed to temperatures below the recommended range. “Vaccine delivery needs perfection or [the vaccine] is not going to work,” said Ben Hubbard, chief executive of Parsyl, a cargo insurance specialist. Parsyl has teamed up with Lloyd’s to launch insurance to cover the costs of delivery and use data analysis to ensure supply chains are more robust, so that less vaccine is ruined.

In this background comes the news that - Lloyd’s has crated  Syndicate 1796 to insure transportation of COVID-19 vaccine. The specialist Lloyd’s of London insurance and reinsurance marketplace has announced the creation and in principal approval of Syndicate 1796, a new “syndicate in a box” designed to insure both the storage and transportation of a COVID-19 vaccine once developed to emerging economies.  Syndicate 1796 forms the foundation of the Global Health Risk Facility (GHRF) at the Lloyd’s market, which is designed to provide comprehensive insurance and risk mitigation services to support the manufacturing and distribution of a coronavirus vaccine development efforts. Lloyd’s states that the new syndicate in a box is aiming to commence writing business from the start of October, 2020.

As part of the GHRF, Lloyd’s explains that Syndicate 1796 will be backed by development finance capital, enabling it to share risks with leading cargo syndicates, making fairly priced cargo coverage available. In addition, the GHRF is set to offer ‘All Risk’ cargo coverage for transit and storage risks on all global health products related to the virus, and any other infectious disease control and prevention programs. This is the first time in the history of the specialist Lloyd’s re/insurance market that a public-private syndicate has been created to address a global health emergency. Furthermore, GHRF will also provide cover via direct insurance or reinsurance, for in-country distribution risks to make sure vaccines and other commodities are protected as they are stored in warehouses and travel through health systems.

According to Lloyd’s, eligible insurers include private manufacturers, procurement agents, logistics companies, Ministries of Health and other public agencies supporting the distribution of COVID-19 vaccines and other lifesaving products to low income countries. Ben Hubbard, CEO of Parsyl, said: “We’ve seen Lloyd’s stand behind risks to some of the world’s greatest achievements and innovations. We asked, why not find a way to stand behind the largest vaccine campaign in human history. The Global Health Risk Facility will do this by sharing risk and leveraging new data to unlock insurance solutions for high stakes vaccine distributions around the world.”

So the Insurance Industry is proactively gearing up to innovate cover even before the Covid 19 vaccine hits the market.  “Protecting vaccine investments saves lives. That’s why this unique partnership is so important because it will provide a combination of coverage, incentives and data that can both prevent losses from happening and provide protection if they do.”  Look forward to learning more of the insurance coverage, the analysis and the factors that go into its pricing !

With regards – S. Sampathkumar

28.7.2020.