It is on the basis of new events that things often change, setting precedents. No one doubts that Covid will (and already is) a textbook case, with all the consequences that this can have on a private and professional level. For the first time, all sectors were impacted by the crisis. In this context, insurers have – more than ever – a role to play. But in what way? Who to insure what? Where the pandemic risk had previously only been covered in very specific areas (e.g Food & Beverage ), suddenly it became a question of insuring everyone. Proposals are beginning to emerge from both the private and public sectors to (re)think about how to insure pandemics, which have suddenly become a major and globalized risk.
Fanny Eyraud, director and founder of PSPI gives her opinion on what should be done in the future for pandemic risk.
In view of the risk of future pandemics, the CEO of Baloise advocates the creation of a pool of insurers, divided between public and private insurers. Your opinion ?
In principle, I agree with him. This was done in 1978 with the creation of such a pool of 18 cantonal building insurance companies for earthquake damage coverage. In this example, insurers specifically dedicated to this sector have merged. What is very complicated with the pandemic risk is that normally insurance is done by sector. With the pandemic, all sectors are affected at the same time. How do we deal with the funds? No private insurer has enough funds to insure all its clients simultaneously against a risk of such magnitude and impact. On the other hand, the problem with state funds lies mainly in their responsiveness. A mix between the two is therefore ideal: to the responsiveness of the private sector is added the fund capacity of the public sector.
As the CEO of Baloise insurance said : “the costs of a possible second wave of Coronavirus cannot be borne economically by private insurers.”
The seismic risk pool currently guarantees coverage of CHF 2 billion, plus a further CHF 2 billion in the event of a second earthquake in the same year. How much pandemic cover could be provided if a similar pool were to be set up?
In my opinion, the ideal would be for insurers to cover up to, for example, 1 million, and then the surplus would be covered by the public sector.
Would a partnership across borders be possible?
Yes, but only if someone is designated to play the role of regulator. I am thinking here of the Lloyd’s market, which already performs this function with insurers and legal entities jointly insuring risks under the supervision of this body. Being by definition international, this market could therefore regulate a pandemic partnership if one were to emerge.
In your opinion, how will the private insurance sector evolve following this unprecedented event?
Insurance players, in both the private and public sectors, need to modernize their way of thinking in order to go further together. We need to rely on the skills of each player and move away from a “public versus private” logic. For me, brainstorming and exchanges between sectors seem to be more than necessary today, especially with the threat of a second Covid wave!
But, once again, I still say that a regulatory body is essential. The Lloyd’s market seems – to me – to be the most capable of fulfilling this role. But the impetus must first come from the countries themselves. Who will give the go-ahead and who will agree to sit around the table ? These questions are still open.
Photo : © Alexandra Koch / Pixabay