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Speakers at a recent OECD event, including Ferma’s president Dirk Wegener, fear that moves towards government-backed public-private-partnerships (PPPs) to tackle pandemic risk across Europe and at EU level have stalled. It seems that on the one hand governments have put the idea on the backburner as they fight new waves of Covid-19, while other stakeholders have got bogged down in details over how such schemes should work. Some suggest that governments are waiting for insurers to take the lead and vice versa, leaving things in stalemate.
The majority of European
countries have begun discussions on potential PPPs to pick up BI losses for
infectious diseases. However, more than a year on from the start of the
pandemic, no national or European solution is in sight.
In fact, Switzerland recently dropped its plans to develop a public-private pandemic insurance scheme that was going to be based on private insurers assuming a portion of claims and a state-backed reinsurance arrangement.
“There is concern that we have lost momentum – there are other more important priorities than this, at least in some countries, unfortunately,” said Mr Wegener during the OECD event, held in partnership with Marsh McLennan.
He subsequently told Commercial Risk Europe that it is “unfortunate but understandable” that proposals for a catastrophe risk resilience scheme seem to have lost momentum at European level because of continuously rising Covid-19 infection rates, vaccination programme challenges and ongoing financial losses.
However, Mr Wegener stressed that the risks have not gone away and added that “we need to make a start” on working towards a solution.
“We need to start to walk before we can run. Minor progress in the right direction is essential at this point,” he told the audience at the OECD event.
Ferma believes that national pandemic PPPs could be useful for European risk managers but will likely only provide part of the solution for the European single market.
It therefore reiterated calls for a pan-European scheme for pandemic and eventually wider systemic NDBI risks, and is “convinced” the EC will turn its attention back to this issue “in time”. Ferma will continue lobbying efforts to encourage its creation.
Mr Wegener said it will take a while to create a European catastrophe resilience mechanism but he told CRE the time has come for insurers and risk managers to start working more closely together on the issue, to drive things forward and thrash out some details.
“Our proposal is for a public-private partnership that has good risk management and an insurance mechanism as its foundation. Ferma, therefore, now calls on the insurance industry to work with corporate risk managers to develop the fundamentals of a European catastrophe resilience scheme,” he said.
“It is in both our interests to create a framework of state-of-the-art risk management measures to mitigate the financial impact of non-damage business interruption for catastrophe risks. The insurance industry has knowledge and expertise that it can deploy. Ferma wishes to work with insurers as part of our long partnership,” he added.
Greater collaboration with insurers would allow Ferma to continue advocating the need for a solution with key parties such as Eiopa, and then get buy-in from governments and the EU once they are able to get on top of the current Covid-19 pandemic and give future solutions more attention.
However, Mr Wegener told the OECD event that although the insurance industry does not have the financial means to cover the impact of a pandemic, it “would be good if they were more enthusiastic about being part of a solution”.
He complained that the insurance industry is “downplaying” its role and capabilities to deal with events like the pandemic.
“We believe they can do much more than providing financial support. There is also a vast amount of technical intelligence and expertise in assessing risk, calculating risk and modelling risk that can be helpful and instrumental in offering a product that incentivises proper risk management, and to support the ultimate goal of building resilience in society and the economy as a whole,” he added....
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