Insurer BI premiums insufficient for COVID losses - study

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.”