21-09-2020
Irdai panel proposes Rs 75k cr pandemic pool
Insurance AlertssIrdai panel proposes Rs 75k cr pandemic pool
Mumbai: A panel constituted by the insurance regulator has called for setting up a pandemic pool with a backstop from the government ranging from Rs 75,000 crore to Rs 1,23,000 crore. The pool would provide cover against business interruption losses, which is currently not covered for pandemics as it is beyond the risk appetite of insurance and reinsurance markets. One outcome of the pool would be that it will protect MSME workers and migrant labourers from loss of income.
“There are estimates that current business interruption premiums in some markets would need to be collected for over 100 years to cover two months of Covid-related business interruption costs,” the report of the committee created by Irdai to look into setting up a pandemic pool said.
In July, the insurance regulator had set up a nine-member working group headed by Irdai ED Suresh Mathur to look at insurance solutions for the kind of massive disruption that was caused by the coronavirus pandemic. A pool refers to the practice of insurers coming together and committing funds to meet claims arising out of any particular risk in proportion to the total business they do.“Though government introduced provisions of extended moratoriums on loan, it hasn’t served enough. Government also announced a major financial stimulus equivalent of 10% of India’s GDP amounting to Rs 20 lakh crore. However, this one-time stimulus was ad hoc and took a huge toll on the government’s coffers. The possibility of occurrence of such future pandemics can no longer be ruled out. Doling out one-time ex gratia packages is not a viable long-term solution to such occurrences,” the report said.
While recommending a pandemic pool, the working group said that as this would be designed to cover future pandemics only and hence any subsequent waves of Covid-19 or any mutations related to Covid-19 cannot be covered and are excluded from the scope of this pool.
With an assumption of 4 crore employees and workers getting benefited and payout is limited to 3 months maximum, then the total payout will be Rs 78,000 crore, the report said.
“As per recent Indian Nuclear Insurance Pool (INIP), it is recommended to start with pandemic pool of Rs 5,000 crore. The remaining amount of Rs 75,000 crore will be required as backstop guarantee from the government,” it said.
Source: The Times of India
