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).
Further, 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.
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.
“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.
“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.
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