A new report from The Geneva Association is calling on the world’s governments to work together with the insurance industry in order to address the colossal protection gap caused by the COVID-19 pandemic.
The report, “Public-Private Solutions to Pandemic Risk,” is the first report prepared by The Geneva Association under the “An Investigation into the Insurability of Pandemic Risk” research series. It noted that although “prohibitively” high capital requirements make it impossible for private insurers to cover for pandemic business continuity risks, insurers can still make important non-risk bearing contributions that utilise their expertise in risk assessment, risk mitigation, and claims management.
According to the report, business interruption risk related to the pandemic is “uninsurable by insurers alone.” Citing figures, the report noted that 2020 saw projected global output losses of more than $4 trillion due to COVID-19. By comparison, the global P&C insurance industry collects $1.6 trillion in annual premiums, with just an estimated $30 billion earmarked for business interruption policies.
In its report, The Geneva Association put forward four potential pandemic risk funding schemes where governments can lend a helping hand to the insurance industry:
“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,” said The Geneva Association managing director Jad Ariss, who added that economic conditions were so dire during the pandemic that the public sector had to provide 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,” the managing director said.