Can a vaccine insurance pool inoculate makers and sufferers?

Covid-19 vaccine manufacturers - foreign (Pfizer and Moderna) and Indian (Serum Institute of India) - are calling on the Indian government to vaccinate them against liability claims for their vaccine's adverse effects on multiple people.

In simple terms, an insurance pool is an agreement between insurers to write a particular deal together, as each one carries an enormous financial risk.

Any claims are to be settled from the pooled money / premium.

“An insurance or reinsurance pool is a constraint of: (a) The financial strength required to support the insurance / reinsurance offer is too great for individual companies or sometimes even national or international markets cannot withstand alone. Sometimes it is not financially advisable to act alone. One example is nuclear risk and the nuclear liability pool, "R. Raghavan, former GM of General Insurance Corporation of India and founder-CEO of Insurance Information Bureau, told IANS.

He went on to say that a pool is formed when the assessment of exposure from the risk is too complicated either due to technological dimensions or when the extent of the diversity of risk occurrences is large or frequent, which prevents risk management for risk elimination or avoidance. Examples of this are space risks, natural disasters, terrorism.

The third reason for a pool would be that while the per capita risk is modest, it can cumulatively jeopardize any individual insurer, says Raghavan.

A senior official for a state-owned property insurer who prefers anonymity told IANS: "Without international reinsurance support, Indian insurers will not be keen on such risks."

“Whether insurers should go with this suggestion is left to their prudence. The pool only comes if insurers want to get in at all, ”KK Srinivasan, a former member of the Insurance Commission of India (IRDAI), told IANS.

An industry expert told IANS, subject to anonymity, that vaccine manufacturers fear class action lawsuits that could result in high damage payments in the event of side effects from their product.

He said the pool could be formed with local capacity or with reinsurance support.

“A pool cannot have unlimited liability. Its liability must be limited. A Covid-19 vaccine pool is short-term and may not be viable. In the case of a short-term pool, after a certain period of time the corpus is paid back to the contributor. On the other hand, putting all of the vaccines in the pool could be long-term and sustainable, "he added.

According to another senior insurance sector official, the Covid-19 vaccine is still in "work in progress" mode;

"A pool comes into play when the risk is exhausted. Currently, the Covid-19 vaccine is a risk that is underway in many countries. Perhaps in three / four months some patterns in insurance coverage and the pool may emerge. " Officials who prefer anonymity, IANS said.

When issues like jurisdiction are clearly limited to India, the government can look to Prime Minister Fazal Bhima Yojana's model. Create the required capacities with the active and competitive participation of direct insurers and reinsurers. Use internationally agreed liability limits, said Raghavan.

"By extending this, you can even invite participation in the capital markets through the issuance of indemnity bonds that can be liquidated by Indian courts on pledges and serviced at reasonable rates until then," he added.

However, it is also not known whether vaccine manufacturers will lower their price if they are granted such immunity, as the price also takes insurance, litigation risk and compensation into account.

(Venkatachari Jagannathan can be contacted at v.jagannathan@ians.in)

--IANS
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