Ferma has called on the insurance industry to work with risk managers to drive a pan-European risk transfer solution for pandemic and wider non-damage business interruption (NDBI) risk, amid concerns that momentum has slowed and insurers aren’t taking the lead.
Speakers at a recent OECD
event, including Ferma’s president Dirk Wegener, fear that moves towards
government-backed public-private-partnerships (PPPs) to tackle pandemic risk
across Europe and at EU level have stalled. It seems that on the one hand
governments have put the idea on the backburner as they fight new waves of
Covid-19, while other stakeholders have got bogged down in details over how
such schemes should work. Some suggest that governments are waiting for
insurers to take the lead and vice versa, leaving things in stalemate.
The majority of European
countries have begun discussions on potential PPPs to pick up BI losses for
infectious diseases. However, more than a year on from the start of the
pandemic, no national or European solution is in sight.
In fact, Switzerland recently
dropped its plans to develop a public-private pandemic insurance scheme that
was going to be based on private insurers assuming a portion of claims and a
state-backed reinsurance arrangement.
“There is concern that we have
lost momentum – there are other more important priorities than this, at least
in some countries, unfortunately,” said Mr Wegener during the OECD event, held
in partnership with Marsh McLennan.
He subsequently told Commercial
Risk Europe that it is “unfortunate but understandable” that proposals for a catastrophe
risk resilience scheme seem to have lost momentum at European level because of
continuously rising Covid-19 infection rates, vaccination programme challenges
and ongoing financial losses.
However, Mr Wegener stressed
that the risks have not gone away and added that “we need to make a start” on
working towards a solution.
“We need to start to walk
before we can run. Minor progress in the right direction is essential at this
point,” he told the audience at the OECD event.
Ferma believes that national
pandemic PPPs could be useful for European risk managers but will likely only
provide part of the solution for the European single market.
It therefore reiterated calls
for a pan-European scheme for pandemic and eventually wider systemic NDBI
risks, and is “convinced” the EC will turn its attention back to this issue “in
time”. Ferma will continue lobbying efforts to encourage its creation.
Mr Wegener said it will take a
while to create a European catastrophe resilience mechanism but he told CRE the
time has come for insurers and risk managers to start working more closely
together on the issue, to drive things forward and thrash out some details.
“Our proposal is for a
public-private partnership that has good risk management and an insurance
mechanism as its foundation. Ferma, therefore, now calls on the insurance
industry to work with corporate risk managers to develop the fundamentals of a
European catastrophe resilience scheme,” he said.
“It is in both our interests to
create a framework of state-of-the-art risk management measures to mitigate the
financial impact of non-damage business interruption for catastrophe risks. The
insurance industry has knowledge and expertise that it can deploy. Ferma wishes
to work with insurers as part of our long partnership,” he added.
Greater collaboration with
insurers would allow Ferma to continue advocating the need for a solution with
key parties such as Eiopa, and then get buy-in from governments and the EU once
they are able to get on top of the current Covid-19 pandemic and give future
solutions more attention.
However, Mr Wegener told the
OECD event that although the insurance industry does not have the financial
means to cover the impact of a pandemic, it “would be good if they were more
enthusiastic about being part of a solution”.
He complained that the
insurance industry is “downplaying” its role and capabilities to deal with
events like the pandemic.
“We believe they can do much
more than providing financial support. There is also a vast amount of technical
intelligence and expertise in assessing risk, calculating risk and modelling
risk that can be helpful and instrumental in offering a product that
incentivises proper risk management, and to support the ultimate goal of
building resilience in society and the economy as a whole,” he added....
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