Lloyd's of London has published a number of ways for the insurance industry to fast-track a global economic and societal recovery from COVID-19 and prepare for future pandemics.
Published in a new report, the proposals include three frameworks that are freely available for use across the world, two of which require government and re/insurance industry partnerships.
A 'ReStart' solution is focused on giving certainty of non-damage business interruption coverage, initially to small and medium-sized businesses (SMEs), by pooling limited capacity across a number of Lloyd’s market participants.
The product would help SMEs reopen following a pandemic outbreak, offering a range of limits that ensure it is affordable for customers, without requiring any government support.
'Recover Re' sets out a proposed ‘after the event’ insurance product framework, that could provide immediate relief and cover for non-damage business interruption over the long term, including the current COVID-19 pandemic.
Meanwhile, 'Black Swan Re' would provide reinsurance for commercial non-damage business interruption cover for black swan events through industry pooled capital, backed by a government guarantee to pay out if ever the pool has insufficient funds.
"COVID-19 has demonstrated that there is much more we can do to support our customers by providing protection for the changing risks they face,” said Lloyd's chairman Bruce Carnegie-Brown
“Some of these risks are of a scale that require partnership with governments globally and this report identifies ways in which the insurance industry could work with governments to share risk and create a braver, more resilient world.”
Lloyd’s estimates that it will pay between $3bn (£2.4bn) and $4.3bn to its global customers as a result of the far-reaching impacts of COVID-19.
Alongside the three frameworks, it is also developing a Centre of Excellence, supported by up to £15m, to better understand, model and create products that better protect customers against systemic risks, including pandemics.
This will include new technical capabilities and services to support insurers, and academic partnerships to develop a better understanding of systemic risks and customers' emerging needs from the insurance industry.
“These Lloyd’s proposals show what a positive role our industry could play as society rebuilds and recovers,” said Scott Purviance, CEO of Amwins “Most of these proposals will need governmental support in each country to turn these good intentions into the practical solutions.”
Author: Chris Seekings
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