As insurers and businesses in the UK and now Australia battle in court over whether the impacts of COVID-19 have triggered payments under business insurance policies, risk managers have urged the European Union to push forward on a public-private partnership solution.
FERMA, the association which represents Europe’s risk management associations has thrown its support behind European insurance authority EIOPA’s plan to create a pandemic resilience scheme.
EIOPA has published details of its proposals within its “Issues Paper on Shared Resilience Solutions for Pandemics”.
The plan calls for public-private partnerships to be explored at national and European level, to seek greater support for businesses hit by the economic and social impacts of the pandemic. The scheme was drawn up after the regulator obtained the views of commercial insurance buyers through FERMA, and a wide range of European re/insurance brokers.
“EIOPA’s principal aim is to address the near total absence of risk transfer for non-damage business interruption losses (NDBI) for systemic risks, as FERMA proposes in its ‘Resilience Framework for Catastrophe Risks’,” said a spokesman for the association. “FERMA believes that a public-private insurance-based solution, based on a sound foundation of risk management, is essential to support European enterprises against pandemic. It also argues that, even though there is action in some member states, European-level involvement is necessary to create resilience across the Single Market. Pandemic has no borders.”
FERMA added: “Only an insurance-based public-private partnership can provide appropriate incentives for companies to apply modern risk management / loss prevention tools that can respond to exceptional risks. This will contribute significantly to the overall recovery from the current pandemic and resilience to future catastrophic events.”
For such a scheme to work, FERMA believes the European Union “must” be involved.
“It needs to coordinate and ensure minimum standards of national schemes across Member States,” said FERMA. “The EU should also establish an expert group for the necessary data sharing and risk modelling, as EIOPA suggests. Ultimately, a European financial backstop is likely to be necessary.”
The Association added that it would also like to see the EU promote risk management at enterprise and national level.
“Only by doing this, will we strengthen our resilience to catastrophic risks,” it added.