Beat Strebel, Swiss Re Head of Middle East and Africa, has asserted that pandemics such as Covid-19 are ‘uninsurable risks’ as their costs exceed the capacity of the global insurance industry.
Strebel told news agency The Africa Report that Swiss Re was keen to strike up public-private partnerships with governments to help provide businesses with cover that insured them against pandemics. “We can’t do it alone,” he said.
While Swiss Re Swiss Re expects that it has made enough this year to be able to cover the majority of its final Covid-19 losses (the company reported Covid-related claims and reserves of US$2.5 billion at the end of July), recent liability issues concerning business losses due to lockdowns have surfaced in the insurance sphere.
African business appeal against rejected claims
In Africa, hospitality companies have taken South African general insurer Santam to court to appeal against its attempts to avoid paying out for Covid-19 losses by arguing that the pandemic and the government’s lockdown response are two separate issues. Over in the UK, the High Court recently ruled in a test case brought by the financial regulator, finding in favour of small businesses that were forced to close down during the pandemic.
Depending on the verdict in Africa, Santam will be able to pass certain claims onto its reinsurers (Swiss Re is not confirmed to be a reinsurer of Santam). Santam says that it will welcome the legal clarity that the ruling will provide, which is due mid-November.
Lower insurance penetration in Africa results in less-costly claims
Still, Strebel said that claims on business interruption policies have been lower in Africa than elsewhere due to lower penetration levels here.
The continent of Africa has the largest ‘protection gap’ in the world according to Strebel. He insisted that ‘everyone is needed at the table’ to help provide more risk coverage in Africa. “We can’t claim that we have been successful in cracking the market,” he added.
That being said, Strebel did also note that South Africa represented a burgeoning market for the uptake of travel insurance, and this was thanks to historical factors that had acted to encourage more people to purchase insurance. The Spanish flu pandemic of 1918-19, for example, he said, made great efforts to attract insurance customers by highlighting the amount that had been paid out in life insurance claims.
Customer perceptions that insurers are likely to pay out clearly greatly increases insurance penetration, and so, at a time when industries are looking to retain, if not, increase their revenue, it is important that reinsurers and insurers – and maybe even governments – work together to find a way to cover the business interruption losses that are being reported in many parts of the world.