its dedicated taskforce, which was convened earlier this month."> its dedicated taskforce, which was convened earlier this month." /> its dedicated taskforce, which was convened earlier this month."> FERMA calls on Commission to create EU resilience framework for cat risks - CIR Magazine its dedicated taskforce, which was convened earlier this month.">

FERMA calls on Commission to create EU resilience framework for cat risks

The Federation of European Risk Management Associations has today called on the European Commission to create an EU resilience framework for catastrophic risks to address the "severe shortage" of business interruption insurance without physical damage, or NDBI. The group's letter is the result of work carried out by its dedicated taskforce, which was convened earlier this month.

FERMA's vision for a multi-layered and graduated public-private partnership would lead to the creation of a framework would have the flexibility to respond to a range of catastrophic events, such as pandemic and large-scale cyber attacks, that can create severe business losses without physical damage.

President of the group, 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. FERMA members have expertise and experience in the field of business interruption that we want to contribute to the future resilience of European business.”

“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, from small and medium-sized enterprises facing immediate liquidity issues, to the largest transnational corporations concerned with supply chain and trade disruptions."

Re/insurance participation is also important, according to FERMA. Insurance can apply clear parameters to give risk-based assessments for contributions from enterprises to the framework funding mechanism. In turn, this would give businesses an incentive to apply risk management methodologies, such as ERM, because they would be assessed on their risk management maturity.

“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.”


A new resilience framework? (Source: FERMA)

The resilience framework proposed by the group would function on four levels:

1) Enterprise-level risk management: anticipation, prevention, identification and mitigation of risks

2) Transfer of risk to private insurance and reinsurance markets, developing enhanced coverage for NDBI

3) National Member state pool guarantees

4) European Union support for, and coordination between national governments

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