Some Insurers Exclude Ebola; Others Offer New Products

October 23, 2014 by Carolyn Cohn, Richa Naidu and Avik Das

As fear of Ebola infections spreads to developed economies, U.S. and British insurance companies have begun writing Ebola exclusions into standard policies to cover hospitals, event organizers and other businesses vulnerable to local disruptions.

As a result, new policies and renewals will become costlier for companies opting to insure business travel to West Africa or to cover the risk of losses from quarantine shutdowns at home, industry officials told Reuters.

“What underwriters are doing at the moment is they’re generally providing quotes either excluding or including Ebola – and it’s much more expensive if Ebola is included,” said Gary Flynn, an event cancellation broker at Jardine Lloyd Thompson Group Plc in London.

While Ebola has killed more than 4,500 people in West Africa, and other diseases such as influenza are arguably more likely to cause measurable harm in the West, the arrival of a few isolated Ebola cases in Western countries has focused their insurers’ minds on the virus’s potential to cause damage.

The impact on liability insurance has been limited. In the United States, workers’ compensation covers medical care and lost income for those who fall ill at work. Because such policies are regulated at state level, Ebola exclusions are unlikely.

Some property and casualty insurers, however, are considering Ebola before writing or renewing policies.

ACE Ltd said on Wednesday that its global casualty unit, which offers coverage for U.S.-based companies whose employees travel or that have operations abroad, was using a policy endorsement to exclude Ebola on a “case-by-case basis” during the underwriting process on new policies and renewals.

It said it was taking into account the risk posed by Ebola to clients who travel to and have operations in African countries with “potentially higher risk exposure.”

Others are introducing new products tailored for Ebola.

“Probably the biggest issue coming up is business interruption,” said Tony DeFelice, managing director of Aon Risk Solutions’ national casualty practice in the United States.

A business interruption could be anything from the loss of key employees to sickness to the quarantine of an airliner or cruise ship used by a suspected patient suffering from Ebola or any other serious infectious disease.

But many property and business interruption (BI) policies are triggered only by direct physical damage to property, insurance broker Marsh wrote this month in a note on Ebola.

“This means that without special provisions – for example, manuscripted wording to broaden coverage – healthcare providers’ property insurance and BI policies would likely not be triggered based solely on the presence of Ebola,” Marsh said.

Miller Insurance Services LLP and William Gallagher Associates last week launched the first product to insure hospitals against losses from any shutdown made necessary by Ebola quarantine, teaming up with Lloyd’s of London underwriter Ark Syndicate.

More could follow. Aon Plc has created an “Ebola task force” to monitor the outbreak and help clients prepare for potential risks.

JLT’s Flynn said the cost of insuring an event against Ebola would be about triple the amount of normal cancellation insurance, if the venue was in a region not known to be affected by the virus.

He said organizers would pay about 0.1 percent of potential revenue from an event for insurance excluding Ebola coverage. Including Ebola, the cost rises to about 0.3 percent.

No events have yet been canceled in Britain or the United States as a result of Ebola; only three cases have been diagnosed in the United States to date, and none in Britain. But concern has been growing, and Ebola has moved to the forefront of the U.S. election campaign.

The U.S. government said on Tuesday that travelers arriving from any of the three centers of the outbreak, Liberia, Sierra Leone or Guinea, must fly into one of five airports that have enhanced screening in place. Britain is also screening arriving air and rail travelers.

(Additional reporting by Sonali Paul in Melbourne, Tanya Agrawal, Amrutha Gayathri and Neha Dimri in Bangalore; Writing by Robin Paxton; Editing by Kevin Liffey)

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