Munich Re, Metabiota enter into long-term cooperation agreement for risk transfer solutions for epidemic risks

Reinsurer Munich Re announced on Monday that it has entered into a long-term cooperation agreement with Metabiota, a San Francisco-based company that has pioneered the use of real-time data collection and comprehensive risk analytics for epidemics.

Metabiota uses a staff of epidemiologists and researchers in more than 20 countries, who collectively have over 100 years of epidemiological and international field expertise, to provide forecasts and data on outbreaks. This information can help countries, governments and multilateral organizations manage and mitigate epidemic risk, before outbreaks occur (for example, by stockpiling antibiotics or antiviral medicines).

The issue of epidemics has always been present in life insurance, but epidemic risks are mostly excluded in property and casualty insurance products, Munich Re said in a press release. Now, based on the data and analytics provided by Metabiota, Munich Re aims to develop models and insurance solutions in P&C insurance designed to mitigate the economic losses caused by epidemics. “The solutions will support the recovery of national economies and businesses, enabling individuals to return to normal life,” the release said.

While the recent Ebola, SARS and MERS epidemics pose a serious threat to the health and lives of individuals, these infectious diseases can also severely affect national economies and company balance sheets.

For example, as a result of the MERS virus outbreak in South Korea last summer, the country’s tourism industry plunged 41% from the previous year and revenue losses for the country are estimated to amount to over US$90 million. “It is not difficult to imagine the financial losses suffered by large leisure facilities and hotel operations with a daily turnover of up to US$8 million when an epidemic drastically reduces the number of visitors,” the release said. But under the new partnership, Munich Re has been able to use Metabiota’s data to create an innovative epidemic risk transfer solution – essentially business continuity insurance – that will better minimize the macroeconomic impact of these outbreaks.

Munich Re added that it is also in the process of developing new types of P&C insurance cover for industries such as hospitality and travel that could be severely affected by an epidemic. A global pandemic, however, will remain a major challenge for the insurance industry due to the extreme accumulation.

“Epidemics are not one-off events, but demonstrate distinct patterns similar to natural catastrophes,” said Nathan Wolfe, founder and CEO of Metabiota, in the release. “And just as natural catastrophes can be insured despite the diversity and uniqueness of the events, epidemics are no exception. We are capturing unique data on infectious diseases supporting the development of financial mechanisms to limit the economic impact of epidemics.”

Tobias Farny, chief executive Asia-Pacific for Greater China, Korea and Southeast Asia at Munich Re, added that “when it comes to finding solutions, it all starts with data analytics that help us better understand the direct and indirect costs of infectious diseases for various industries.” Eventually, Farny predicted, “the company will be in a position to model the potential financial impact an epidemic may have on a region and its economy and offer the right insurance solutions.”

Munich Re has already made use of Metabiota’s data and real-time monitoring capabilities to structure innovative solutions to transfer epidemic risk to investors in a private placement and has also worked with Metabiota on data analysis for a cover for the infectious disease MERS in Korea.