It’s no secret that businesses worldwide have been severely impacted by the Covid-19 pandemic, and that insurers globally are continuing to assess individual business interruption (BI) claims, with many reports having surfaced of insurers disputing the validity of claims. Many of these have since been taken up by High Courts, which often ruled in the favour of businesses.
In a report titled An Investigation into the Insurability of Pandemic Risk, the Geneva Association wrote: “Insurers would have to collect premiums for 150 years in order to absorb the estimated US$4.5 trillion global output loss inflicted by Covid-19 and its handling in 2020.”
Even the size of the entire global property & casualty insurance industry, which amounts to $1.6 trillion in premiums, is eclipsed by the economic damage from the pandemic, the report says.
P&C insurers never intended to cover the risk
“In order to cover the total cost, all P&C insurers worldwide would have to collect premiums across all lines of business for almost three years, with no money left for covering private homes and vehicles, injured workers and numerous liability exposures,” the report read. “Therefore, P&C insurers have typically applied strict exclusions on pandemic business continuity risk and never intended to cover it.”
Government-insurance partnerships needed
“Pandemic-induced business losses defy basic, widely-accepted criteria for insurability. Unlike risks like natural catastrophes, they occur on a global scale and are not diversifiable,” reasoned lead author, Kai-Uwe Schanz, report Lead Author. “Governments and insurers urgently need to figure out the right partnership modalities to prepare for – and respond to – extreme risks like pandemics.”
Schanz is not the first to make this observation. In early October, Swiss Re’s Head of Middle East and Africa said much the same.