PR89109

ZURICH, April 22, 2021 /PRNewswire=KYODO JBN/ --

- To support government-insurer discussions on how to close the protection gap

for business interruption risk in the case of a pandemic, The Geneva

Association has released Public-Private Solutions to Pandemic Risk (

https://www.genevaassociation.org/research-topics/socio-economic-resilience/public-private-solutions-pandemic-risk-research-report

), outlining four possible government-led schemes: 1) direct insurance, 2)

reinsurance, 3) social insurance and 4) post-event protection.

- The first report in this series, An Investigation into the Insurability of

Pandemic Risk (

https://www.genevaassociation.org/research-topics/socio-economic-resilience/investigation-insurability-pandemic-risk-research-report

), revealed that business interruption risk is uninsurable by insurers alone:

compared to projected global output losses of more than USD 4 trillion for 2020

due to the pandemic, the global P&C insurance industry collects USD 1.6

trillion in annual premiums, with just an estimated USD 30 billion for business

interruption policies.

- Capital at risk makes it impossible for private insurers to offer meaningful

pandemic business interruption coverage, but they can make important non-risk

bearing contributions that leverage their expertise in risk assessment, risk

mitigation and claims management.

COVID-19 has illustrated that pandemic-related business interruption is

directly linked to the decisions of governments to implement lockdown measures,

making it impossible for insurers to model and price such a risk. Furthermore,

it is systemic in nature, inducing widespread and simultaneous financial

losses. Coverage for pandemic business continuity risks with meaningful limits

will therefore remain unavailable from the private insurance market due to

prohibitively high capital requirements. Government involvement is essential to

enhancing preparedness for and resilience to future pandemic shocks.

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In this context The Geneva Association has just released Public-Private

Solutions to Pandemic Risk (

https://www.genevaassociation.org/research-topics/socio-economic-resilience/public-private-solutions-pandemic-risk-research-report

), expounding four exemplary pandemic risk funding schemes where governments

can play a leading role:

    -- Direct insurance: the public sector provides voluntary or

       mandatory insurance to businesses exposed to pandemic risk

    -- Reinsurance: governments provide reinsurance coverage to

       insurers that kicks in above a certain threshold and up to a

       certain limit

    -- Social insurance: modest public-sector coverage with mandatory

       participation through pre-event payments (e.g. tax or levy)

    -- Post-event protection: an ad hoc safety net offered by

       governments to those affected

Recognising there is no one-size-fits-all solution, the report assesses the

benefits of each scheme against seven public policy goals: 1) maximum coverage,

2) limited public exposure, 3) matching of funds with needs, 4) risk mitigation

incentives, 5) cost-efficiency of risk transfer, 6) operational efficiency, and

7) macroeconomic benefits.

Jad Ariss, The Geneva Association's Managing Director, said: "It is a tragedy

that businesses, particularly SMEs, have suffered so much financial loss during

the pandemic as a result of the lockdowns, which were beyond their control. The

public sector had to step in with multi-trillion dollar emergency relief

measures. Governments and insurers must work together on how to close the

massive protection gap exposed by COVID-19, with governments as the leading

players."

Kai-Uwe Schanz, The Geneva Association's Head of Research & Foresight and the

leading author of the report, said: "We want to emphasise that of the four

pandemic risk insurance schemes outlined, distributing cash post-event – as

many governments did for COVID-19 – is likely least effective. For the other

schemes, deciding whether participation is mandatory or voluntary, as well as

the role of insurers in pricing and offering coverage, are critical

considerations. We hope this report effectively guides governments and insurers

in finalising their partnership terms."

About The Geneva Association

The Geneva Association is the only global association of insurance companies;

its members are insurance and reinsurance CEOs. Based on rigorous research

conducted in collaboration with its members, academic institutions and

multilateral organisations, The Geneva Association Identifies and investigates

key trends and risk areas that are likely to shape or impact the insurance

industry and develops corresponding recommendations for the industry and for

policymakers.

In total, the companies of Geneva Association members are headquartered in 25

countries around the world; manage USD 17.1 trillion in assets; employ 2.4

million people; and protect 1.8 billion people.

pamela_corn@genevaassociation.org

SOURCE  The Geneva Association