The Federation of European Risk Management Associations (FERMA) has called on the European Commission to create a resilience framework to address a “severe shortage” of business interruption insurance without physical damage (NDBI).
In a letter to the commission yesterday, FERMA warned that there is almost no insurance coverage available for financial losses from NDBI in cases of catastrophic risks, such as the current COVID-19 pandemic.
It sets out a vision for a multi-layered public-private partnership, providing a resilience framework with the flexibility to respond to a range of catastrophic events, such as pandemics and massive cyber attacks.
Detailed proposals are included in a new position paper, which explains how the spread of COVID-19 around the world, and particularly within the EU, has revealed a “systemic weakness” in insurance markets.
“A resilience framework will support the development of NDBI coverage to give European enterprises the financial security to maintain flexibility in the face of catastrophic events and incentives to apply risk management methodologies,” FERMA president Dirk Wegener said.
“We now aim to deepen discussions with the EU, the member states and the insurance sector, and to develop solutions for both short-term crisis management and long-term business resilience.”
The resilience framework proposed by FERMA would function on four levels:
- Enterprise-level risk management: anticipation, prevention, identification and mitigation of risks
- Transfer of risk to private insurance and reinsurance markets, developing enhanced coverage for NDBI
- National member state pool guarantees
- EU support for, and coordination between, national governments.
“This holistic approach supported by the insurance sector, national governments and EU institutions would ensure that the resilience framework has the capacity to benefit all businesses,” Wegener continued.
“FERMA members have expertise and experience in the field of business interruption that we want to contribute to the future resilience of European business.”
Author: Chris Seekings
Image credit: iStock
