Pandemic shows that existing insurance solutions do not offer sufficient protection for the economy, says German risk management association
The German insurance and risk management association, GVNW, has called for the establishment of a suitable structure for hedging future pandemic risks.
It says the pandemic has shown that existing insurance solutions do not offer sufficient protection for the economy and uses the example of business interruption, which typically only pays out if triggered by property damage.
As representatives of the insurance industry and German industry, GVNW reports that it is currently seeing ”a large number of examples” in which insurance companies are not granting cover protection for the coronavirus pandemic. In addition to a number of insurance law disputes, it expects that the discussion about the meaningfulness of the insurance and its reputation will become an important topic going forward.
The GVNW is already in talks with representatives of various institutions to discuss the potential for future pandemic coverage. It is calling upon the private insurance industry, together with government support, to set up a suitable structure for hedging future pandemic risks.
It believes insurance coverage for pandemic risk would then be easily accessible for companies in the future and offer comprehensive coverage against the economic consequences of a new pandemic. Such a cover structure could come in the form of a pandemic pool, it suggests, point to examples of risk pools covering accumulation risks - e.g. natural disasters and terrorist risks - in various parts of the world.
CEO of GVNW, Dr. Alexander Mahnke, said: “A pandemic is basically not a ‘black swan’, we all knew that such a risk could one day be realised. The extent, not least in economic terms, has caught us out. So far, the insurance market has not provided suitable protection against this and, due to the financial capacities required for this, will not be able to do this in the future.”
”For this reason, we are of the opinion that a private-government initiative is necessary in order to create suitable hedging instruments for the future. The example could be EXTREMUS, the terrorist insurer founded in Germany after 9/11/2001, behind which the federal government stands with a state guarantee provided by the German insurance industry.”