Marsh’s president and chief executive relays how brokers and insurers can work together to solve the pandemic dilemma in the future
Widespread pandemic cover could make the insurance sector the “first line of economic response in future outbreaks”.
Global broker Marsh has seen “significant limitations” to which property and liability policies are responding to pandemic related losses, and this means that some policy holders will be disappointed.
This is according to Marsh’s chief executive and president John Q Doyle speaking at International Forum of Terrorism Risk (Re)insurance Pools (IFTRIP) Livestream 2020 earlier this week.
He continued: “While some specialty policies may include coverage for pandemic claims, the vast majority of policies do not explicitly cover this risk. Given the specific and extensive effects of Covid-19, many insurers are expected to exclude pandemic risk going forward.
“The complex nature of pandemic risks means that we need strong global and national pandemic management. This requires insurers backed by governments to write pandemic insurance policies and for brokers to contribute risk knowledge and infrastructure.”
Prior to the 9/11 terrorist attack on the US in 2001, most standard policies covered terrorism as part of the policy or without specifically mentioning it, but in the aftermath, reinsurance for terrorism risk was withdrawn and commercial insurers stopped covering it.
“Insurers’ general view was that the risk of loss was unacceptably high, unpredictable and too difficult to price,” Doyle said.
He reiterated the need for public and private partnerships to better mitigate risks for future pandemic and shock events, giving Pool Re as “poster child” of a successful programme in the UK.
A public-private risk solution will:
- Facilitate access to capital
- Limit tail risk for commercial insurers
- Create greater certainty for businesses, employees, and insurers
- Enhance resilience of global economics
Doyle said that the right risk programme could create new technology, insurance products, different ways of working and policies that are tied to a parametric trigger – it is this that could help make pandemic risk more manageable.
He admits capital needs to be “modest” due to the range of shock events, although he predicts a gradual increase in stake to the private sector.
Speaking about the need for an economic safety net, he continued, “there is also a need to break the panic and glut cycle around pandemics”.