The pandemic risk, insurers’ future Eldorado

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First finding. Insurance is not a public service. An insurance company is there to serve its members only who join their premiums in order to help each other on the occurrence of an event as per the contract. The premiums collected by the insurer are not designed to pay for the losses of natural or legal persons not party to the mutual society. It is the State’s task to help individuals and companies having sustained prejudice from a disaster that is excluded from the insurance field.

Second finding to the detriment of insurers: even though the elaboration and drafting of the insurance contract are strongly regulated by the Insurance Code, many insurers continue to issue imperfectly worded policies, ill-defined risks, unfair terms, ambiguous exclusions, etc. It is therefore only logical that an insurer who issues an unclear contract and who does not comply with conformity rules imposed by the legislator should be penalized. In the case of Covid-19, any clause poorly drafted by the insurer shall serve the interests of the insured.

Last finding, the concept of catastrophic risk is not static: from the only conventional guarantees granted in the past to cover man-made disasters, insurers have gradually consented to the coverage of natural disasters. They then broadened their scope of operation by assuming under certain conditions the risks of attacks, terrorism, civil and foreign war. With the Covid-19, the business is up against an even greater challenge; a pandemic is not a local disaster like a cyclone or a terrorist act. It is by definition global, hence the possibility of claims of extraordinary proportions. The challenge faced by insurers is commensurate with the immensity of the premium pool at hand.

Atlas Magazine N°173, July 2020 [1]