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Law360, London (June 25, 2020, 5:05 PM BST) -- The creation of a state-backed reinsurer solely focused on guarding against business losses from pandemics risks ignoring other problems that could have a systemic effect on society in future, insurance executives warned Thursday.
Liz Foster, managing director of the Society of Insurance Broking, said the government should expand the scope of a planned pandemic reinsurer and avoid taking a "whack a mole" approach in dealing with other major risks.
Foster is one of the co-founders of Totus Re, a proposed model for a so-called super perils reinsurer that would effectively subsidize business insurance cover for pandemics, as well for major cyberattacks and climate change.
Totus Re was created weeks after the announcement that several insurance chief executives had formed a steering committee to establish Pandemic Re, which will be focused on coordinating an industry response to COVID-19 and other major disease outbreaks in future.
Foster said the founders of Totus Re were "wholly supportive" of the goals of Pandemic Re.
"We are encouraged by the prospect of the industry uniting behind a single proposal to bring to government," she said.
"Broadly, our aims are complementary: a partnership with the state to enable (re)insurers to viably ensure that the products businesses will need to successfully weather the next national crisis, are available and affordable," she added.
A spokesperson for Pandemic Re's steering committee did not immediately respond to a request for comment.
The committee was established in April under the auspices of state-backed terrorism reinsurer Pool Re, after insurers came under fire for refusing to compensate businesses for losses during the lockdown.
Insurers and industry groups say the pandemic is "too systemic" to allow private companies to offer protection against it, and have called for a government-led approach.
From the outset, Pandemic Re's steering group said it was looking for an "industry solution for future pandemics."
A reinsurer effectively insures a portion of the risk on any policy, limiting the amount an individual insurer has to pay out in a single claim.
At the start of June, the committee said it had appointed more than 50 industry representatives to the working groups to work on anything from risk modeling to organizational structure.
Amber Rudd, who served as Home Secretary under Theresa May's government, will oversee a working group looking at the legal, regulatory and government implications of the reinsurer.
--Editing by Rebecca Flanagan.
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