Insurers and drug manufacturers are sailing into the unknown with the launch of the Covid-19 vaccine

The rapid global delivery of Covid-19 vaccines by air and sea in extremely cold conditions will lead to an increase in cargo insurance rates and stimulate demand for new coverage areas, leaving underwriters on high alert.

Pharmaceutical companies typically manage the risks of transporting their products by purchasing insurance or by relying on an internal insurer, known as a “captive” insurer.

But as Pfizer and other drug makers begin rolling out vaccines more broadly, existing annual company-wide cargo insurance programs are likely to be insufficient, industry sources say.

“Where manufacturers or logistics service providers see gaps in their coverage, they can look to insurance markets to fill those gaps,” said Charlie Netherton of broker Marsh.

The first US vaccine shipments departed from Pfizer’s facility in Kalamazoo, Michigan this week, as tens of thousands of people in Britain received the first dose of Pfizer vaccine, developed with Germany’s BioNTech.

Moderna is also expected to launch a Covid-19 vaccine once regulatory approval is obtained, as is Britain’s AstraZeneca which has developed a vaccine with the University of Oxford.

Vaccine shipping, however, is already at high risk, with around 30% of vaccine shipments globally lost due to damage or theft, insurance sources say.

Prices for new contracts in the transport insurance market were rising sharply even before the pandemic as a result of increased claims and reduced competition, and industry sources predict that insurance rates will rise when the pharmaceutical companies involved in Covid-19 vaccines will renew their annual policies next year, given the additional risk.

“Vaccine manufacturers who do not have long-term contracts must expect additional insurance costs of up to 20% over the previous year,” said Reiner Heiken, chief executive officer of US-based Hellmann Worldwide Logistics.

These companies are also expected to offer greater coverage for additional risks, including cold transport and a greater likelihood of old-fashioned cyber attacks or theft, sources said.

To keep insurance costs down, pharmaceutical companies are likely to take more of the initial risk or use more internal prisoners, which have become increasingly popular in large corporations.

Pfizer, Moderna, and AstraZeneca immediately responded to requests for comment via email.


Insurers, for their part, also risk claims for liability insurance if the vaccines are administered after being damaged in transit and causing major side effects, said Nicky Stokes of broker New Dawn Risk.

A shipment carrying tens of thousands of packages of a lost, stolen or damaged Covid-19 vaccine from a refrigerated truck or container is worth an estimated $ 15- $ 50 million, industry sources say.

Those losses compare to total cargo insurance claims of $ 563 million last year, the International Maritime Insurance Union said.

The US and UK governments have said they will take the risk of liability if the vaccines cause side effects, but it is unclear whether this includes side effects caused by damage in transit.

Any losses on vaccine shipping would add up to more than $ 100 billion in claims due to the pandemic forecast by Lloyd’s of London this year across a range of insurance classes.

Transportation of the vaccine by early adopters like Pfizer requires constant conditions of -70 degrees Celsius. Monitoring will be complex on a large scale.

If vaccines “deviate outside their optimal temperature range for any length of time, regulatory bodies will deem them flawed and unfit for consumption, which for policyholders or insurers would mean a loss,” Mel Buitendag said with the Gallagher insurance broker.

The vaccine has so far been flown by air.

However, AP Moller Maersk, the world’s # 1 container shipping company, said it has a deal with COVAXX, a division of US private group United Biomedical, to move the vaccine into specialized refrigerated containers.

“Air freight is already happening,” said Hristo Petkov, Maersk’s global head of pharmaceuticals. “For ocean volumes we are looking at the end of the second quarter and the beginning of the third quarter.”

COVAXX CEO Mei Mei Hu told Reuters that he was working with Maersk to ensure full cargo insurance for the full value of each shipment.

“The biggest common risk for temperature-controlled cargo transported by sea or air is at the transition points at the last mile – between ocean and inland or air and inland,” Hu said.

“Any transition point can introduce additional handling, changes to feeds or delays in customs clearance that can threaten the integrity of the shipment.”

Armed guard

Interpol has issued a global warning that vaccines are the main target of organized crime.

Vaccines are likely to require advanced monitoring and even armed escorts, Gallagher’s Buitendag said.

Cargo insurance typically rules out cyberattacks, so pharmaceutical companies usually purchase extra coverage.

“A successful worldwide deployment will require unprecedented data connectivity,” said Kevin Rimmer, cargo manager at broker McGill and Partners.