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Insuring governments against disease outbreaks

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In the wake of the Ebola outbreak in Africa, a new plan has emerged to guard against future risk: insurance for disease outbreaks. The idea is to help protect governments and industry against the costs of pandemics. A San Francisco firm announced $30 million in funding for the idea this week.

Today, nobody can buy an insurance policy that protects them from a pandemic. But by 2017, at least one company promises to have a product on the market. Dr. Richard Wilcox runs the African Risk Capacity, a company that sells insurance to African countries and is owned by the governmental body the African Union. He says when Ebola hit, countries lacked money for the basics, like public health workers and the ability to quarantine. So Wilcox says they waited, as governments around the globe and philanthropists passed the hat.

“The cost of having to wait for funds to be mobilized abroad is so expensive to their economy, to their vulnerable populations that they protect,” he says.

If a country takes out a policy, it will be able to get cash quickly to support efforts to control outbreaks. Wilcox estimates costs can run into the tens of millions for even cases numbering in the single digits. Aon insurance consultant Dr. Gisele Norris says Ebola has governments, insurers and companies thinking about pandemics in a whole new way.

“Ebola was so instructive in that was a completely unforeseen event. And no one was prepared,” she says. “I think maybe what it brought home was there is a whole world of emerging and re-emerging infectious disease out there.”

The point, says Norris, is that we don’t know what’s going to strike next time, but there will be a next time. With that new thought in mind, she says certain industries like healthcare, aviation, hospitality and higher education are at higher risk and may look for ways to limit their financial exposure. Of course, price will determine the size of any future market. 

In Africa, ARC will sell policies that encourages public health investment. The more prepared for an epidemic, the lower its premiums—perhaps a model for industry as well.





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