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The Federation of European Risk Management Associations on Thursday urged the European Commission to back the development of public-private partnerships to cover future pandemic risks.
Many European businesses face “inevitable and sometimes severe financial losses” due to pandemic events, and insurance provides “little if any cover” for these risks, Brussels-based FERMA wrote in a letter to the European Commission.
“Insurers are introducing more exclusions and tighter conditions as policies renew. We do not expect this to change,” FERMA President Dirk Wegener wrote.
Pandemic risk, like climate change and cyber risk, is “systemic” and “beyond the capital of the private insurance market to provide material capacity” to transfer the risk, FERMA said.
It urged the EU to help member states by providing modeling, rate setting and start-up costs for the creation of national pandemic public-private partnerships.
Additional support in the form of an EU backup layer, possibly through the European Stability Mechanism, an agency that provides financial assistance, would allow the convergence of all national systems to a European standard, FERMA said.
Backstops already in place, such as the United Kingdom’s Pool Reinsurance Co. Ltd. and France’s Caisse Centrale de Réassurance, manage extreme risks such as terrorism and natural catastrophe, FERMA said.
“These offer possible models for new initiatives, as they have an established process to provide funds to those affected by such risks,” FERMA said.
COVID-19 is having a “devastating impact” on businesses across Europe, and risk managers are doing whatever possible to support their companies and national governments to reduce that impact, FERMA added.
The move by European risk managers comes as momentum continues to build in the U.S. for a federal backstop for pandemic insurance.
More insurance and risk management news on the coronavirus crisis here.