The pandemic exposed a massive protection gap in the area of business continuity risk, according to the Geneva Association and University of St Gallen
Amid widespread public discussion on how to address the deep financial implications of COVID-19, The Geneva Association and the University of St Gallen have addressed the risk-taking capacities of insurers related to pandemics in a new study.
Among the report’s main findings are that, encouragingly, health and life risks for a pandemic resembling COVID-19 pose no fundamental insurability challenges. However, P&C insurers have nowhere near the capacity needed to shoulder projected global output losses of more than $4 trillion for 2020. By comparison, they collect $1.6 trillion in annual premiums, with just $30 billion for business interruption policies.
Jad Ariss, The Geneva Association’s managing director, said: “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.
”But, as our research shows, 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.”
Kai-Uwe Schanz, The Geneva Association’s head of research & foresight and the leading author of the report, said: “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.”