Health Risks

South Korea: New insurance solutions for viral disease MERS

This cover shows how quickly Munich Re can respond when there is an immediate need.


In May 2015, a case of MERS was reported from South Korea: a traveller returning from the Middle East. Within a few weeks, many more infections – evidently arising from this index case – occurred in Korea. This caused great uncertainty among tourists and unsettled the economy. The travel industry in particular suffered high cancellation rates, and air traffic from China fell by half.
Middle East Respiratory Syndrome (MERS) is a viral disease primarily affecting the respiratory tract (lungs and airways). This infection is thought to be spread through direct or indirect contact with infected dromedary camels or camel-related products. As soon as someone is infected with the MERS virus and has developed symptoms, they can pass the infection to others. The international health authorities rated the risk of a pandemic as very low – but Munich Re nevertheless saw a need for action in Korea.

Risk as opportunity

There were still significant numbers of travel cancelations and the Korean economy suffered. Munich Re raised an idea and in order to regain trust and to revive tourism, in the middle of June the Korean government had announced that it would insure international travellers to Korea against the risk of infection and death. Cover of US$ 5,000 was to be provided for anyone infected with MERS, and US$ 100,000 for MERS-related death. With this Munich Re provided a politically and economically sustainable risk-transfer solution. “This means a shift in our product range: instead of providing benefits after an event, we now offer risk financing even before an event occurs. This is a paradigm change as far as cover is concerned”, explained Belhassen Tonat, Head of Underwriting at Munich Re in Seoul.

Rapid response, good cooperation

The MERS insurance and other measures to contain the disease made an impact: the fall in the number of visitors, and thus the economic downturn, proved to be smaller than expected. According to the Korea Development Institute, gross domestic product in June was only slightly negative, at –0.26% (by comparison: GDP fell by 3% during the swine flu outbreak). This cover shows how quickly Munich Re can respond within the Group when there is an immediate need. And the current innovation initiatives were extremely helpful to project and assess the risks.
“As soon as we learned that the Korean government wanted to offer MERS cover, identified colleagues at Munich Re who could contribute. We were expected to come back with a product proposal within just 48 hours”, says Belhassen Tonat. So many uncertainties and the race against time but Munich Re (group) with its worldwide network of branch offices and subsidiaries used this spread to develop a solution literally around the globe by using the different time zones and different expertise areas.