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The industry is under pressure from governments in Europe and elsewhere to develop “pandemic insurance” to help businesses cope with events like the coronavirus lockdowns.
French government leaders, for instance, in April called on insurers to be “more generous” and come up with a plan for future coverage. In the United Kingdom, too, the industry faced a backlash over the amount of support available to shuttered businesses.
But the costs of such events outstrip what insurance companies can pay. Even with typical business policies excluding global disease events, the Lloyds of London market has estimated its coronavirus payouts are “likely to be far in excess of … historical events” such as the terrorist attacks of September 11, 2001.
In response, insurers in several countries around Europe are drawing up ways to bring in public money as a supplement to private industry, so they cover small companies, not just the big firms that can take out such policies now. But that will require buy-in from political leaders.
“There is a large debate here in France in how we could protect corporates against this situation in the future,” Stéphane Pénet, deputy chief executive of the French Insurance Federation (FFA), told POLITICO.
“And so, our work is a contribution to this debate which is now political [rather] than technical.”
The issue has been on the agenda since March, when the coronavirus spread across Europe and forced closures of companies — which then found out that their standard business-interruption insurance policies did not include cover for a pandemic.
Insurers argue they cannot be on the hook for a crisis that hits everyone at the same time. The business is built on the premise that a large pool of customers pay premiums but only a small number make claims at any one time.
It’s not an easy problem to solve. The FFA pitched its proposal to government last week for a pool where insurers and reinsurers cover up to €2 billion of claims. After that, the state would step in.
“The traditional insurance and reinsurance private market would not be able to cover this … without partnership with the government,” Pénet said....