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Epidemic and pandemic risk solutions
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Epidemic and pandemic risk solutions

Risk transfer and investment solutions for protection against catastrophic disease outbreaks

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    The frequency and scale of emerging infectious diseases with pandemic potential has been increasing over the last two decades. For very nearly all countries, pandemic remains the single biggest threat of a catastrophic event. To create more resilient organisations and global financial ecosystems, we need robust approaches to risk sharing. Are you prepared for future pandemics?

    Epidemic and pandemic threat dashboard

    Pandemic and epidemic threats constantly occur. This dashboard is a visualization of data from Disease Outbreak News (DONs) published by the World Health Organization (WHO), which report outbreaks that could cause serious public health impact and spread internationally or disrupt international travel or trade.

    Filtering functionality allows searching by world region, disease or on those diseases that have been assessed by the WHO as presenting the greatest epidemic and pandemic threat where there are no or insufficient vaccines or treatments.

    Please note that not all cases of disease or outbreaks are reported in DONs.

    Epidemic and pandemic threat dashboard
    100
    The World Health Organization (WHO) publishes on average around 100 DONs per year reporting significant outbreaks.
    >5
    On average, >5 new diseases emerge in people every year some of which have the potential to become a pandemic.
    75%
    75% of emerging infectious diseases have their origin in animals. Viruses that jump from animals to humans present the greatest threat.
    6.7%
    Human activity has accelerated the pace of emerging infectious diseases at an annual rate of 6.7%.
    >US$10trln
    The estimated financial impact of previous pandemics range from single-digit US$ bn to > US$10trln for COVID-19 and rising.
    Human activity is the main driving force of this increased risk; deforestation, agricultural expansion, urbanisation and climate change together with increased global interconnectivity makes us increasingly vulnerable to pandemics and their serious economic impacts.
    +1.5°C
    Global warming is likely to reach 1.5°C between 2030 and 2052 if it continues to increase at the current rate.
    (Source: IPCC)
    +46.5%
    Between 2000 and 2050, the proportion of world’s population living in urban areas will increase by 46.5%.
    (Source: United Nations)
    +137.7%
    The propensity to travel will increase by 137.72% from 2019 to 2042.
    (Source: Airbus)
    22-28%
    22-28 % likelihood of another pandemic in the next 10 years.
    (Source: Metabiota)

    Transferring and distributing epidemic and pandemic risk

    To better address the severe impact of epidemics and pandemics, risk exposure needs to be efficiently reallocated across a variety of stakeholders – including capital market participants. 

    The ability of Munich Re’s Epidemic Risk Solutions (ERS) unit to price, structure and transact epidemic and pandemic risks, as well as actively manage risk exposure, is key to help closing a significant insurance gap. As an industry thought leader and market maker, providing professional investors with the opportunity to participate in a new premium paying asset class with attractive yields.

    With the balance sheets of the whole insurance industry being by far not large enough to bear all economic losses resulting from global pandemic events such as COVID-19, the creation of an Epidemic Risk Markets platform is key to providing innovative risk transfer solutions.

    Together we help to close epidemic and pandemic insurance gaps

    Non-life segment:
    severe financial impact to corporates
    Life segment:
    mortality stop loss risk profiles
    Public sector segment:
    outbreak response financing

    Our portfolio of risk transfer and investment solutions

    In the event of an outbreak, rapid action is required. Customised risk transfer solutions, with simple and transparent settlements, are crucial for insurers, corporates and the public sector alike. That is why we design policies depending on the client's individual exposure. Premium, coverage, as well as epidemic and pandemic, economic and geographical triggers are customised in advance. In a period where the risk transfer market for epidemic and pandemic solutions is nascent, the current aggregate capacity available for the product is limited.

    Key benefits of epidemic and pandemic covers

    • Risk transfer: financial coverage for viral epidemic and pandemic outbreaks
    • Customisation: policy defined depending on the client's individual exposure and the financial capabilities
    • Transparency: pre-defined triggers and geographical scope
    • Liquidity: improve cash flow management with faster access to liquidity
    • Expert knowledge / advice: access to epidemiological and specialised risk management expertise

    Triggers of the risk transfer solution in the insured event 

    Interested? Let's help closing protection gaps.

    * Capacity varies while market is forming. Munich Re has licensed fronting arrangements in most jurisdictions including all US states.

    The approach of Epidemic Risk Solutions is to transform the risk into a transferable, premium-paying asset class that can be exchanged with the capital markets at a fair price. This increases the availability of capacity and rewards participants at the same time. This new asset class is based on proven risk distribution techniques which enable the risk transformation from insurance markets to capital markets.

    The creation of a fixed premium-paying asset class can bridge the gap between an insurance need and a latent investor demand for diversified return enhancement. Insureds and investors can exchange risks to manage potential risk concentrations that could negatively impact financial ecosystems and societies. Thus, an Epidemic Risk Markets platform is created to broaden available risk transfer options, in particular for non-damage business interruption insurance risk. The platform enables risk transfer in different formats and is also open for public sector participation.

    Key benefits of this new asset class compared to conventional investments

    • Low correlation
    • Low mark-to-market volatility
    • Short maturity
    • Yield pick-up

    Epidemic risk transfer – platform and actors

    Interested? Let's create a resilient financial ecosystem.

    The Epidemic Risk Solutions team of Munich Re provides specialist structuring, pricing and underwriting expertise to Captives – enabling it to robustly offer broader cover and retain or transfer separately. Insurance is available for almost all known and unknown viral diseases.

    Our collaborative approach allows us to address your specific needs. For you, this means that we can underwrite tailor-made solutions, including new risks.

    Key benefits for Captives 

    • Coverage for viral epidemic and pandemic outbreaks 
    • Cost-effective risk transfer 
    • Strategic risk management 
    • Compliance with regulations 
    • Liquidity and cost control 
    • Access to specialised risk management expertise 

    Combine your strengths with ours

    Requirements and challenges Captive Munich Re Together How a joint solution could work
    Creating an insurance policy for this new Non Damage Peril is complex and requiring epidemiological expertise. Х Munich Re has spent many years creating solutions to fit differing risk profiles and can structure/price products.
    Policy structure must meet regulator’s approval. Х Munich Re is a globally regulated, rated and trusted reinsurance partner since being founded in 1880.
    Premiums and limit must be justifiable and reasonable and “arms length”. Х Munich Re uses Big Data and epidemiological expertise to justify premiums and limits.
    Policy should cover all aspects of parent’s loss resulting from the epidemic or pandemic. Х If Munich Re’s participation in all aspects of parent’s loss is not desired or feasible, these exposures nevertheless can be modelled for the captive. For example coverage for liability.
    Policy should cover COVID-19 losses. Х If the captive has appetite to cover COVID-19 losses (including further waves), Munich Re can model this exposure for the captive.
    Licencing for all covered areas is challenging and expensive for a captive. Х Munich Re has licensed fronting arrangements in most jurisdictions including all US states.

    Interested? Let's enhance your Captives' capacity.

    * Capacity varies while market is forming. Munich Re has licensed fronting arrangements in most jurisdictions including all US states.

    Risk distribution for global sustainable development and resilience

    Pandemics, such as Covid-19, have an overarching impact on Environmental, Social and Governance (ESG) sustainability and resilience factors. As a consequence of globalisation and deforestation the frequency and intensity of disease outbreaks will only increase in the future. Creating a platform to manage, monitor and transfer future pandemic risks can contribute towards the UN Sustainable Development Goals (UN SDG’), most specifically #11.

    Why work with Munich Re’s Epidemic Risk Solutions

    Epidemic Risk Solutions has long been an active contributor to risk sharing structures. The team has concluded various transactions in Non-Life, Life and Public Sector insurance and has successfully transferred pandemic risks to investors. Historically, the required capabilities to structure and transact epidemic and pandemic risk had been developed for the management of Munich Re’s own exposure.

    Would you like to know more?
    Get in touch with Epidemic Risk Solutions

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    Epidemic Risk Solutions
    Gunther Kraut
    Gunther Kraut
    Global Head of Epidemic Risk Solutions
    Leigh Hall
    Leigh Hall
    Head of Origination, Epidemic Risk Solutions
    Alexander Liu
    Alexander Liu
    Head of Origination & Underwriting, Epidemic Risk Solutions APAC
    Tina Kirby
    Tina Kirby
    Head of Underwriting, Epidemic Risk Solutions

    Our solutions for financial market risks