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Law360, London (September 2, 2020, 12:35 PM BST) -- European insurers have warned that there may be no state-backed solution to help the sector make payouts on insurance claims linked to the COVID-19 crisis if there is a second peak in the pandemic.
During the pandemic the main focus on insurance has been on losses linked to the interruption of business activity. But pandemic risk can also appear on the balance sheet of insurers offering other lines of cover such as medical, travel and trade credit, according to Frédéric de Courtois, vice-president of Insurance Europe.
"Given the sheer scale of the losses and the challenges it poses to insurability, it is clear that pandemic risk cannot be borne by the private insurance industry alone," de Courtois wrote in the trade body's annual report, which was published on Tuesday.
"Neither will it be possible to devise solutions in time to cover second or subsequent waves of the current pandemic," he added.
De Courtois said that one option for the industry could be to discuss a potential role for the European Union, as the pandemic has struck across Europe. But this would require "strong and broad political support at the highest level," he added.
Such questions remain open, and it is still too early to fully assess all the economic consequences of the pandemic, he said.
Governments in some EU states have started looking at the possibility of public-private sector partnerships as they plan for future pandemics, De Courtois said. They could drawing on experience of existing partnerships for risks such as terrorism.
Countries such as the United Kingdom already have so-called shared resilience solutions, such as Pool Re and Flood Re, schemes which are backed by government guarantees for terrorism and flood insurance claims. But there is concern that there may not be such a scheme in place for COVID-19 claims.
Last month the European Insurance and Occupational Pensions Authority published a paper that looked at tackling the insurance problems caused by the pandemic. The paper also included the possibility of creating a reinsurance pool supported by guarantees from the EU.
EIOPA said the EU could act as a facilitator for governments to create reinsurance pools to cover pandemic losses. This could be a model similar to that used in the British terrorism reinsurer, Pool Re, which is financed by the insurance sector and supported by a government guarantee.
--Additional reporting by Martin Croucher. Editing by Ed Harris.
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