Insurers up against the pandemic

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With pandemic risk being ruled out of all contracts, insurers cannot be in the frontline to come to the rescue of aggrieved persons or companies.

With the exception of some classes of business such as life insurance, event cancellation, assistance and incidentally health, the industry, apart from reinsurance, does not seem to be hard hit by the coronavirus.

It is, therefore, the public authorities that are tasked to provide relief to their populations and save the economy.

Quite obviously, insurers cannot afford to cover mass risks that play out in catastrophic losses. These risks are well beyond their financial capacity, compelling them to mount substantial reserves.

In its magnitude, COVID-19 pandemic, likely to affect millions of individuals and weaken the global economy, does not present any insurability factor, hence its absolute exclusion. Indeed, insurers’ economic pattern is such that it cannot endure the occurrence of such an event.

Insurers cannot be interested in a pandemic risk unless they are compelled or forced to by supervisory authorities. Bound to contribution, the market will have to rise to a double challenge: turning, with the help of banks, the pandemic risk into financial product and more importantly mobilizing a substantial reinsurance capacity in partnership with the State.

Atlas Magazine N°170, April 2020 [1]