The Last Mile

News of the regulatory approval of COVID-19 vaccines for use in the United States and a handful of other countries has sparked optimism across the globe that an end to the pandemic is in sight, potentially by the second half of this year.

But there are significant logistical concerns regarding the distribution of the vaccines in developing countries. Issues including insufficient cold-chain capacity, the lack of optimal equipment for temperature monitoring and maintenance systems, and inadequate transportation and storage facilities all increase the risk of transporting and storing vaccines, thus making the distribution process difficult to insure.

“We met last year with global health organizations to discuss their needs and previous experiences with insurance for [the distribution of] vaccines and health commodities,” says Chris McGill, a class underwriter of marine cargo at Ascot Group. “Unfortunately, their experience wasn’t a particularly good one. They tried to procure insurance a few years ago and just couldn’t get any coverage.”

A solution, however, is at hand. In 2020, Lloyd’s of London formed the Global Health Risk Facility (GHRF), anchored by the new Syndicate 1796, to provide “all-risk” cargo coverage for the transportation and storage of all COVID-19 global health products to developing countries. The syndicate is operated by Parsyl Insurance, a tech-driven cargo insurer, with Ascot Group as the lead underwriter for the facility. Coverage will also be available for non-COVID-19 health products in order to maintain constant routine immunization programs in low-income countries, such as those for polio and measles, which may otherwise be disrupted during the distribution of COVID-19 vaccines.

“A lot of vaccines, not just COVID-19, and other health-related products that are shipped around the world have been insured but, in many cases, have not been protected as well as they could have been,” says Hank Watkins, president of Americas at Lloyd’s. “The Global Health Risk Facility was established to bring together the best minds around the transportation and delivery of vaccines—in this case, COVID-19 vaccines—to the developing nations in the world, where this vaccine will unfortunately not get to as quickly as in more developed countries.” The GHRF will work with global public health agencies, such as Gavi (which works to vaccinate children in poor countries), as well as manufacturers and logistics companies.

What Are the Risks?

The biggest issue with insuring vaccines in low-income countries comes from the difficulties in maintaining cold-chain logistics intact. The supply chain is critical for routine immunization programs, and countries must ensure they can effectively store, transport and deliver vaccines to the target population. But governments in developing countries are sometimes unable to allocate enough funds for fuel, to maintain cold chains, and to sustain integrated systems to track the status of vaccines, often leading to vaccine stock-outs and the inactivation of vaccines due to inadequate storage and transportation.

“A vaccine’s journey from manufacturer to patient is a perilous one, because nearly all vaccines need to be kept cold, some need to be frozen and, even with COVID-19, some need to be kept ultra-frozen,” says Ben Hubbard, CEO and co-founder of Parsyl. “So maintaining that cold chain from start to finish is paramount, as any break in that cold chain can render a vaccine completely ineffective. So this is a supply chain that needs to run nearly perfectly. And it needs to run nearly perfectly everywhere, including in countries with weaker supply chains and infrastructure.”

The Pfizer-BioNTech vaccine, for example, which was approved for distribution in the United Kingdom in December, needs to be stored at the extremely cold temperature of minus 94 degrees Fahrenheit (minus 70 degrees Celsius). This can be a strenuous task for many developed countries, but low-income nations are especially at risk, as cold-chain systems are already struggling to support non-COVID-19 immunization programs. Any exposure to temperatures outside of a narrow range may accelerate the vaccine’s loss of potency, thus decreasing the availability of immunization supplies and wasting limited financial and human resources. “This is a challenge everywhere,” Hubbard says. “It’s a challenge in high-income countries and low-income countries, but, of course, it is a greater challenge in lower-income countries because of the weaker infrastructure.”

Most cold-chain inventories do not have systems for routine data collection, which limits the existence of accountability structures and inhibits accurate and regular inventory updates. This leads to an estimated one third of vaccine doses in developing countries being wasted due to exposure to inappropriate temperatures, to expiring in warehouses or to misuse. Additionally, vaccine wastage accounts for around 8% of the total cost of immunization programs in low- and middle-income countries. Of course, data collection is especially challenging when distributing vaccines in remote areas, where electricity is often unavailable or unreliable, cold-chain infrastructures are inadequate, and there are difficulties transporting vaccine doses to the target population living far from the health centers.

The transportation and storage of vaccines is another great source of risk. Some developing countries are known to suffer from a lack of “warehouse-to-warehouse” insurance coverage, which would cover the cargo from the supplier’s warehouse to the buyer’s warehouse. “From an insurance perspective, vaccines are fairly well monitored and insured as they’re shipped from a manufacturer into a country,” Hubbard says. “But once they arrive in lower-income countries, vaccines typically go uninsured and data collection is even more sparse. We always found a bit of an irony in that, because that’s when the risk increases.”

Foreign cargo insurance covers are often designed to end at the port or airport of the receiving country. Once the vaccine arrives in a country, it is distributed to regional and provincial storage locations before being administered to the general population. No two countries are similar in all respects of their vaccine supply chain or their topography, their type and number of routes available, or their economic and political conditions, which makes it very difficult for insurers to develop and price coverage accordingly. Thus, it is logical that few insurers want to carry the extensive responsibility for the “warehouse-to-warehouse” transportation and storage of vaccines, as damages can occur in a multitude of situations and at any part of the supply chain. When insurers are willing to provide coverage for warehouse-to-warehouse distribution, developing countries are often charged high premiums reflecting the substantial risks. Of course, that’s a considerable financial constraint for low-income countries, which may already not be able to afford vaccines at the price of $1.50 per dose.

Mitigation and Scale

The Global Health Risk Facility was not originally envisioned to insure vaccines during a pandemic, as the development of Syndicate 1796 started well before COVID-19. Hubbard says Parsyl started working with the Ascot Group two years ago on providing coverage for routine immunizations for children in low-income countries. “It has taken that amount of time to build awareness and educate the market, as well as to develop the technology to get to where we are today,” Hubbard says. “So when COVID hit in March, we had already laid out a lot of the groundwork, not knowing that we’d put it to use for a pandemic.”

The cold-chain risks are mitigated by Parsyl’s advanced supply chain data platform, which allows distributors and insurers to monitor temperature conditions during a vaccine’s entire journey. Parsyl has vast experience in monitoring and mitigating cold-chain risks because of its work, with Gavi, providing visibility to vaccine supply chains in Senegal. Recently, Parsyl has added insurance coverages to its sensor products to continue to support the distribution of immunizations to developing countries.

The Global Health Risk Facility was launched Jan. 1 in order to be operational for the distribution of the first round of vaccines. Ascot, the lead underwriter for GHRF, is looking to fund the facility through a portfolio approach. The facility, McGill says, “needs to have scale so it is possible to afford coverage to the locations and countries that need it the most and in an equitable manner.” The facility is also a way for Lloyd’s to expand its “syndicate in a box” program, aimed at innovating the Lloyd’s marketplace by allowing syndicates to work from outside the London headquarters. “Syndicate 1796 was created with the goal of reducing the influence of legacy systems and processes,” McGill says. “If you can digitize as much as possible, you can keep your expense ratio low; this efficiency ultimately helps clients and 1796 alike.”

There are still many questions to be answered when it comes to the distribution and storage of the COVID-19 vaccines around the globe. However, what we know for sure is that Lloyd’s solution is an incredible initiative to support the vaccination against the ongoing pandemic as well as a potential new standard for distribution and storage insurance of vaccines in low-income countries. In addition, the Global Health Risk Facility may aid in improving the reputation of the insurance industry by showing compassion and initiative toward the support and well-being of society.