In line with the global trends in other major economies,the insurance regulator IRDAI, on Wednesday,has constituated a nine- memember panel under the chairmanship of Suresh Mathur, executive director, IRDAI, to explore the possibility of forming an “Indian Pandemic Risk Pool’’ to address various risks including Buiness Interruption arising out of a future Pandemic event.
Currently,the insurance industry, globally, has been largely denying claims for losses caused by coronavirus-driven lockdowns from businesses-interruption policies, saying that pandemics are excluded.
The panel will examine the the need for setting up a `Pandemic Risk Pool', giving rationale for the same,recommend the structure and operating model for the Pool within eight weeks, said IRDAI..
There is a need to examine long-term solutions to address the various risks which have been triggered by the current pandemic and offer protection in case of a future similar crisis.Some of the risks like Business Interruption losses without concurrent material damage loss,loss of employment would result in huge losses much beyond the capacity of government /insurers /reinsurers, said IRDAI.
The COVID-19 pandemic which started as a public health crisis has led to significant disruption in economic activity mainly due to the measures taken to limit the spread of the disease.It has affected not just health but all sectors of the economy including but not limited to manufacturing, aviation, tourism, transportation, construction, services, agriculture and many others, said IRDA .
Some of the other members of the panel are-. Hitesh Kotak Chief Executive Officer,Munich Re India Branch, Ankur Nijhawan,Chief Executive Officer,AXA India Reinsurance Branch and Suchita Gupta, general manager, GIC RE.
Currently, insurers and reinsurers globally don't provide any covers to compensate any losses out of a Pandemic event and many countries including USA, UK , and major EU economies have woken up to the situation as the lock-down due to the current Covid-19 pandemic,has generated various kinds of massive business losses which can't be covered under existing insurance policies.Business interruption clauses in insurance contracts do not often cover such exceptional and widespread events, adding to pain for firms as the economies sink.
UK insurance executives have taken step toward developing a public-private risk-financing mechanism for future pandemics with the creation of work streams to take the idea from the drawing board to an operating company.
France is working on a new mechanism for pandemics insurance cover that could entail some state backing, and is exploring funding options to have a scheme in place ahead of another potential coronavirus lockdown..
From an insurance perspective the work would focus on non-damage business interruption.
“It is an exceptional risk, because it is universal, systemic, it cannot be diversified, it cannot be pooled between insurers’ portfolios, hence the need for public-private partnership,” said analysts.
Meanwhile, AXA Re is in talks with various state governments in India for an insurance product to cover loss of incomes during future pandemic or epidemic leading to lockdowns.
The insurance cover can guarantee a regular pay-out for a specific time frame to these affected individuals. The company has recommended that employees with a gross income of up to Rs 2.5 lac per annum can be considered for the purpose of this scheme and benefit of Rs 5000 per month for a period of two months can be envisaged.
In India, with a share of almost 90 per cent of people working in the informal economy, about 400 million workers in the informal economy are at risk of falling deeper into poverty due to job loss during the Covid 19 crisis, according to a recent report by ILO (International Labour Organisation).