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Insurance implications for airlines transporting Covid vaccine cargo

THE distribution of Covid-19 vaccines may be an exciting opportunity for cash-strapped airlines, but carriers will need to work with their insurers to ensure any policies are suited to the new risks, even if they are experienced in the transport of pharmaceuticals

19 January 2021 - 19:00
THE distribution of Covid-19 vaccines may be an exciting opportunity for cash-strapped airlines, but carriers will need to work with their insurers to ensure any policies are suited to the new risks, even if they are experienced in the transport of pharmaceuticals.

In an article in London's Air Cargo News, guests writers Philip Clayton and Andy Bowman of risk management, insurance brokerage and advisory company Willis Towers Watson explore the insurance implications of carrying Covid-19 vaccines in air cargo.



The sheer size of the logistics operation now required to deliver the vaccines across the globe and into its most remote regions is daunting. Indeed, the scale of the challenge is unprecedented.



IATA suggested in October that the equivalent of 8,000 B747Fs (each capable of carrying 100 tonnes) would be needed to deliver enough vaccines for the earth's 7.8 billion inhabitants.



Others believe the entire global fleet may be needed in some capacity, as well as many more ground-handlers who may not be specialists in the 'cold' supply chains that move temperature-sensitive goods.



Traditionally, less than a fifth of global pharma shipments are transported by air to end-user destinations, but the 'speed-to-market' requirements of the Covid vaccine is expected to put unprecedented strain on the cold supply chain, which includes airports, ground-handlers and freight forwarders.



Three of the vaccines' biggest manufacturers - AstraZeneca, Pfizer and Moderna - are expected to have the collective capacity to have produced 5.3 billion doses by the end of 2021, enough for about 40 per cent of the world's population (acquiring immunity will require two doses for some vaccines).



For air-transport providers and their supply-chain partners, the pharmaceutical industry has always required specialist infrastructure and knowledge; at a minimum temperature-controlled environments (Pfizer's vaccine must be stored at minus 70 degrees Celsius until used, for example) and a secure chain of transport are required.



This has kept the greatest proportion of the pharma market in the capable hands of a handful of experienced 'cold' cargo carriers.



But pressure to deliver the vaccine as quickly and widely as possible is expected to bring new, less-experienced operators to assist in their distribution, adding a series of new supply-chain risks.



Logistical challenges are far from the only liabilities that carriers and insurers will need to consider. Shipment values are expected to be significantly higher than for the standard international shipments covered by insurers in accordance with the limits of the Montreal Convention ('the Convention').



The Convention limits damage-related insurance cover to '22 Special Drawing Rights' (SDR) per kg, or a value equivalent to US$30-$32, depending on currency fluctuations.



The market has yet to establish how those vaccines will be valued; the possibilities range from the vaccines?? manufactured or replacement costs, to their retail costs.


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