Insurability of pandemic risk

Health and life risks for a pandemic resembling COVID-19 pose no fundamental insurability challenges according to a new study issued by The Geneva Association in collaboration with the University of St Gallen.

However, the study found that P&C insurers have nowhere near the capacity needed to shoulder projected global output losses of more than $4tn for 2020. By comparison, they collect $1.6tn in annual premiums, with $30bn for business interruption policies.

The study titled ‘An Investigation into the Insurability of Pandemic Risk’ is based on the risk-taking capacities of insurers related to pandemics amid widespread public discussion on how to address the deep financial implications of COVID-19.

“When COVID-19 hit, insurers moved quickly to provide relief to their customers – for example, through reduced premiums – safeguard their employees, and engage with governments. They are promptly paying all legitimate claims where pandemic risk is covered,” said The Geneva Association managing director Jad Ariss.

Nevertheless, the association’s research shows that the pandemic exposed a massive protection gap in the area of business continuity risk. “We need to find sustainable solutions which harness the industry’s potential contributions while maintaining its solvency and viability,” said Mr Ariss.

According to the report’s leading author and The Geneva Association head of research and foresight Dr Kai-Uwe Schanz, insurers are providing meaningful support to people in the areas of health and life during COVID-19.

“But pandemic-induced business losses defy basic, widely-accepted criteria for insurability. Unlike risks like natural catastrophes, they occur on a global scale and are not diversifiable. Governments and insurers urgently need to figure out the right partnership modalities to prepare for – and respond to – extreme risks like pandemics. The Geneva Association’s research will support this endeavour,” he said.

Source: Asia Insurance Review