In July, Tracey Sharis, who manages health care, higher education and financial institution businesses for Lexington Insurance, a Boston-based specialty insurance unit of Chartis, provided some details of Pandemic Rx–one of the coverage innovations launched by Lexington in July 2008.
Pandemic Rx, she explained, is a business interruption endorsement to commercial property policies for acute care medical facilities that reimburses lost income and extra expense incurred during a flu pandemic.
During a July 2009 interview, Ms. Sharis said Pandemic Rx is “adjusted no differently than a regular old business interruption” policy, providing for up to six months of income loss during a pandemic flu event, but that an actual interruption in business activity is not required to trigger coverage.
She explained that the financial strain on health care providers during a pandemic is not caused by a shutdown, but instead by a spike in hospital admissions. An influx of patients seeking flu treatment can result in the cancellation of pricier elective procedures and reduced revenues for the hospitals. “That loss of income is what we pick up” under the policy, she said.
The broad policy trigger is the notice of a public health emergency by any department of public health or health official.
“We don't need the WHO [World Health Organization] or the CDC [Centers for Disease Control] or somebody of that very high macro level to release a warning of pandemic emergency to trigger the coverage,” she said, noting that even a community level, local health authority can make an announcement that would trigger coverage.
The policy also covers certain extra expenses incurred in providing treatment for flu cases, Ms. Sharis said, noting that reimbursements for preparations made for up to 12 months prior to the outbreak may be covered–”for instance, if a facility stocked up on a vaccine that is related to a specific strain of the flu or equipment that would be needed only to treat some kind of influenza outbreak.”
Pandemic Rx also provides expense reimbursement for items such as hiring a public relations firm “to restore their brand or take away some of the stigma that might be associated with having become a quarantine facility or a control zone,” she said. “We also help with public relations relating to the event itself and making sure word gets out that the hospital may be in fact a quarantine center or control zone.”
Ms. Sharis said that the endorsement, which is sold only alongside a commercial property product (not as a standalone coverage), is available to acute care facilities of all sizes with available limits of up to $50 million.
The development of the endorsement grew out of Lexington's “industry vertical approach” to provide an array of products for the health care and higher education segments, including a $1.5 billion limit facility for non-catastrophe property announced in March 2008.
Educational institutions, however, are not eligible for this particular endorsement, she said.
As for pricing, Ms. Sharis said “all risks are considered on an individual-risk basis,” making it impossible to make any broad, sweeping statements about underwriting considerations.
Lexington, operating as an excess and surplus lines carrier, does not have filed or admitted rates, and risks are also priced on an account-by-account basis, she said, adding that each insured is required to take a 10 percent quota-share participation in whatever sublimit it selects.
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