“Munich Re is supporting these solutions with reinsurance capacity, however due to nature of pandemic risks no insurance balance sheet, not even one as strong as Munich Re’s, can absorb the potential losses alone. To make the consequences of a pandemic/epidemic outbreak insurable, Epidemic Risk Solutions is transforming the risks to enable participation of the wider capital markets” Ajay Sadana, Head of Origination Asia, Epidemic & Pandemic Risk Solutions, Munich Re

Mumbai: In a landmark innovative deal, after Covid-19 pandemic catastrophe hit the country in 2020, New India Assurance(NIA) with reinsurance partnership of Munich Re, for the first time, has provided parametric Pandemic Resilience policy to Phoenix Mills, Mumbai’s biggest mall.

The annual parametric cover, with a provision to transfer risks to the wider capital markets, is structured on a first-loss basis with zero deductible, offering protection against loss of revenue and additional increased cost of working, said Ajay Sadana, Head of Origination Asia, Epidemic & Pandemic Risk Solutions, Munich Re.

Phoenix Marketcity, is an emblematic shopping place in the commercial capital of the country, covering an area of 2.1 million square feet and contains stylish shops of fashion brands, stores of electronic gadgets, and a colourful entertainment zone, set to become the first insured entity in India to adopt a Pandemic Resilience policy.

Its business activities include real estate development, planning, execution, marketing, management, maintenance and sales of shopping, entertainment, commercial, residential and hospitality assets.

“We experienced the impact of the last pandemic firsthand — our retail outlets remained closed for 5 to 8 months, leading to zero revenue and substantial fixed costs. It was an extremely challenging period, marked by uncertainty and disruption. That experience has left a lasting impact on the financials of many corporates, including ours. This new insurance solution provides us with the assurance that we are now better equipped and more resilient to face such events in the future.,” Kailash B Gupta, of Phoenix Mills.

Girija Subramanian, CMD, New India Assurance.

As is the normal behaviour once the pandemic is over there is no active demand from the market for cover . This is also due to the fact that there was no ready made cover available . However during the last pandemic there were many businesses that faced huge financial losses due to lockdown / unwillingness of public to move around openly. This continued for a prolonged period and businesses that faced losses would be more than interested in ensuring that they don’t go through it again, commented Girija Subramanian, CMD, New India Assurance.

“Hence with the availability of a solution demand would surely pick up gradually in India Cost would depend on the demand for such covers , how many such policies are issued as well as the reinsurance capacity available for the same,” noted Subramanian.

The placement of cover, whose financial details have not been disclosed due to confidentiality agreements, is supported by Gallagher Insurance brokers.

Explaining the various contours of this intricate cover, Sadana in an exclusive interview with Asia Insurance Post said,“ When discussing Epidemic and Pandemic risk solutions, it is important to remember that at the time of the COVID-19 pandemic most insurers followed communicable disease exclusion clauses, which broadly excluded any direct or indirect losses arising from outbreaks of communicable diseases. Munich Re’s Epidemic and Pandemic Risk Solutions made these risks insurable by offering structured, parametric-based solutions designed to indemnify loss of revenue or gross profit. These covers also extend to additional increased costs of working, helping businesses continue operations during future catastrophic epidemic or pandemic events.’’

Unlike traditional Business Interruption policies, which are typically linked to material damage, Munich Re’s  solutions are built as standalone Non-Damage Business Interruption covers offering a more targeted and resilient approach to managing epidemic and pandemic risks, elaborated Sadana.

“Munich Re’s Epidemic & Pandemic Risk Solutions represent the first structured offering designed to address this challenge. These solutions are built in line with defined parametric triggers indemnifying the insured during future catastrophic epidemics or pandemics,” explained Sadana.

Munich Re is supporting these solutions with reinsurance capacity, however due to nature of pandemic risks no insurance balance sheet, not even one as strong as Munich Re’s, can absorb the potential losses alone. To make the consequences of a pandemic/epidemic outbreak insurable, Epidemic Risk Solutions is transforming the risks to enable participation of the wider capital markets, revealed Sadana.

Normally as the portfolio of such risk covered by Insurance and reinsurance increases to a sizeable level , reinsurers would look at using alternate risk transfer mechanisms to transfer the risk to capital markets by way of cat bonds or other such instruments , said NIA chief.

“ This solution is suitable for all kind of industries. We expect an increasing demand for this kind of covers as the risk is significant’’ averred Sadana.

“Munich Re’s Epidemic Risk Solutions (ERS), are sector agnostic. We are currently structuring solutions and receiving interest from a wide range of industries—including hospitality, airports, airlines, event cancellation, tourism associations, film production,investors, multiplexes, manufacturing, pharmaceuticals, insurance companies, etc. Additionally, ERS also offers solutions for life and  health insurers and for the public sector,’’ highlighted Sadana.

Regardless of industry, data shows that recovery from a pandemic may take a few years to return to pre-pandemic levels. Recognizing this, Munich Re’s Epidemic Risk Solutions are designed to provide a financial cushion during the critical early months of a pandemic. These solutions offer first-loss limit indemnification,which gives the insureds time and means to stabilize operations and implement effective recovery strategies.

“Industries that experienced significant revenue and profit declines during the last pandemic are now recognizing the importance of structured risk solutions. By bridging the immediate financial gap, our approach supports resilience and long-term sustainability in the face of severe epidemic and pandemic disruptions,” Sadana stressed.

The hospitality sector, both in India and globally, saw average revenue losses ranging from 60% to 70%, and took approximately three to four years to recover to pre-pandemic levels. In addition to revenue impact, debt levels across various industry segments raised sharply during COVID-19. Many of these debts are still being serviced today, often at higher interest rates, further straining financial performance and recovery.

On possibility of any such new products from Munich Re for the Indian market, Sadana commented, “The insurance market continues to evolve, and in today’s dynamic environment, customized solutions are becoming increasingly essential to address the growing protection gap. As risks become more complex and unpredictable, especially in the wake of global health crises, tailored coverage is key to ensuring resilience and financial stability across industries. Munich Re’s Epidemic Risk Solutions are designed with this adaptability in mind, offering flexible structures that respond.

Munich Re has recently entered the Asian market with the Maldives Tourism Association becoming the first insured entity in the region to adopt Pandemic Resilience coverage. This marks a significant milestone in expanding Epidemic Risk Solutions (ERS) across Asia.

Outside of Asia, Munich Re’s ERS solutions already have a footprint in markets such as the United States, Africa and Europe, where they have been placed across both private and public sectors. These solutions span a wide range of industries, as previously outlined, and continue to gain traction globally as organizations seek structured protection against epidemic
and pandemic risks.

According to global data modelers such as Gingko Bioworks and Airfinity, the annual probability of a future pandemic on the scale of COVID-19 or worse is estimated to be close to 3 per cent . Over a 10-year horizon, Airfinity states a 27.5% likelihood of occurrence for a pandemic of this size. This is a much higher occurrence likelihood than the insurance industry usually deals with in other lines of business, e.g. fire. This elevated risk profile, together with the global accumulation risk, has historically led to limited appetite for absorbing such exposures within conventional insurance frameworks.