This is an area of active research involving veterinary clinicians, pathologists and entomologists.
It seems likely that mares inadvertently eat whole caterpillars or shed caterpillar exoskeleton (skin) while grazing in paddocks. Following the experimental administration of caterpillar/exoskeleton to mares, setae (hairs) from the caterpillar have been identified under the microscope from tissue samples throughout the body of mares and in the placenta.
The action of setae when passing from the gut lumen into the body of the mare seems to allow bacteria to pass into the mare’s blood and/ or tissues. Bacteria may then gain entry into the pregnant uterus (through the blood stream or in association with setae). This sets a chain of events in process that can in turn result in bacterial infection of the pregnant uterus (foetus and placenta) and result in abortion or birth of a compromised foal.