RIMS, the risk management society®, issued a letter to the U.S. Department of the Treasury, Congress and the Office of U.S. President Donald J. Trump requesting the creation of a pandemic risk insurance program to accelerate economic recovery.
According to RIMS’ letter, a pandemic risk insurance program would provide greater access to capital from lenders and establish a viable insurance market with sufficient, affordable capacity. Additionally, it would create certainty for businesses and organizations of all sizes across the United States and ensure that businesses can meet future pandemic events with greater resilience.
Prior to the letter, the Society administered a survey to U.S. risk professionals to ascertain their perspective on a federal pandemic insurance backstop. Key findings from survey included:
·67% of risk professionals anticipate direct business interruption losses due to COVID-19;
·77% expect the losses to be over $1M. Included in that group was 36% who estimate losses to be more than $25M;
·91% are supportive of a TRIA-type federal loss-sharing program for insurance claims relating to losses resulting from a pandemic or epidemic;
·65% of risk professionals would be willing to pay up to 5% more in premium.
The over 7,500 U.S. members RIMS represent, purchase insurance policies and believe that a public-private partnership that addresses pandemic risk is critical to facilitating access to capital from lenders and equity markets. Such a program will establish a viable insurance market with sufficient, affordable capacity. It will help create certainty for businesses and organizations of all sizes across the United States, and it will ensure that US economy can meet future pandemic events with greater resilience.
“From our homes and our local communities to the boardrooms of some of the world’s largest corporations, COVID-19 has highlighted the need for strong risk management strategies to address interruptions resulting from a global pandemic,” said RIMS President Laura Langone.
“Congress has done exceptional work by quickly introducing the Coronavirus Aid, Relief, and Economic Security (CARES Act) but there is still much work to be done. We look forward to the opportunity of collaborating with them to develop a sound pandemic program that instills confidence in businesses and reinvigorates the economy,”she said.
Meanwhile,the Federation of European Risk Management Associations (FERMA) support the development of government backstops to increase financial resilience against future pandemic risks – similar to what already exists in many countries for terrorism and natural catastrophes.
While many European businesses face inevitable and sometimes severe financial losses as a result of the COVID-19 pandemic event, insurance provides little, if any, cover for these risks, said FERMA President Dirk Wegener in a letter to the European Commission.Pandemic risk is excluded from many insurance policies, he added,
“insurers are introducing more exclusions and tighter conditions as policies renew, and “we do not expect this to change.Pandemic risk, like climate change and cyber risk, is systemic. It is beyond the capital of the private insurance market to provide material capacity for transfer of risk,” Wegener emphasized.
“Europe already has well established schemes to manage extreme risks like terrorism and natural catastrophe,” he said, pointing to the examples of the French Caisse Centrale de Réassurance, Spain’s Consorcio de Compensación de Seguros, the UK’s Pool Re, the German Extremus scheme and nuclear industry pools in several countries.“These offer possible models for new initiatives, as they have an established process to provide funds to those affected by such risks,” said Wegener, who sent the letter on behalf of FERMA’s 21 member associations across Europe.
To manage this enormous risk, he suggested the creation of public-private partnerships for pandemic risk on a national basis throughout the member states of the European Union.
“It is essential to learn from the experience of Covid-19 to use risk management to mitigate the impact of future pandemics at organisation, national and European level,” he continued.
FERMA plans to collect feedback from its member associations to share with the commission.