|
|
Marsh this week published a new report that makes the case for a public-private pandemic risk solution, as the US Congress considers the Pandemic Risk Insurance Act 2020 (PRIA) that was introduced by Congresswoman Carolyn Maloney (D-NY) in May.
“We believe a pandemic risk solution is needed now to accelerate our economic recovery from the global Covid-19 pandemic and provide much-needed protection against future pandemic risks,” said John Doyle, president and CEO of Marsh. “Our goal is to bring all stakeholders together and create the right economic incentives so insurance can serve its traditional function of mitigating risk.”
In the new report, Marsh notes that a range of existing public-private risk-pooling models can be used to create a solution. But the broker points out that the US government is the only entity with the financial resources to help close the pandemic coverage gap.
It says that policyholders, brokers and insurers also have roles to play in “bending the risk curve” so that pandemic events can be better anticipated and their impacts better contained.
“Insurers can play a critical role in developing and encouraging the adoption of pandemic loss reduction measures, while businesses will need to develop a clear view of their exposure to epidemic risk and create mitigation plans that include risk assessments, response plans and insurance coverage,” the report says.
Over time, Marsh says, the right public-private risk programme can spur new technologies, ways of working, services, insurance products and processes to ultimately “chip away” at the enormous losses caused by pandemics. “That, in turn, can help make pandemic risk more manageable and enable the economy to build the necessary resilience it needs for the future,” says Marsh.
The broker says that the key risks from a pandemic include:
Loss of workforce to death and illness, employee absenteeism, and lower productivity
Disruptions to supply chain and other operations, reduced or changed production or service delivery, and reduced customer demand
Reputational damage.
Marsh points out that the International Monetary Fund projects that the global economy will contract by 3% in 2020. It adds that Covid-19 has affected economies in three particular ways:
It arose suddenly and spread quickly
The ensuing economic downturn resulted from concerted actions by governments aimed at slowing its spread
The interconnectivity and interdependence of global supply chains has exacerbated the effects of risk mitigation measures and continued uncertainty.
Marsh says that data can be used to make pandemics insurable.
“Advances in epidemic risk analytics, including modelling and monitoring tools, can help insurers and businesses understand their risks and optimise preparedness and response strategies. They can also better enable epidemic risk measurement, mitigation, and management – including via insurance,” it states in the report.
But that cover will need state backing as the commercial insurance market excludes the cover, points out Marsh.
“Covid-19 has demonstrated the potentially significant limitations around the extent to which property and liability insurance can respond to pandemic-related losses. While some specialty polices may cover pandemic claims, the vast majority do not explicitly do so. Moreover, many insurers are expected to broadly exclude pandemic risk going forward, while existing pandemic coverage options for businesses are limited. Joint action from the public and private sectors can facilitate economic recovery now and for future pandemics,” it says.