Insurance industry think tank The Geneva Association has published its Public-Private Solutions to Pandemic Risk report outlining four possible government-led schemes that could help close the protection gap for business interruption risk in the case of a pandemic. The four schemes relate to direct insurance, reinsurance, social insurance and post-event protection.

The report says the public sector could provide voluntary or mandatory direct insurance to businesses exposed to pandemic risk. In relation to reinsurance, it suggests governments could provide reinsurance coverage to insurers that kicks in above a certain threshold and up to a certain limit.

In looking at social insurance, the report says it could be possible to create modest public-sector coverage with mandatory participation through pre-event payments such as a tax.

Finally, it outlines how post-event protection could come in the shape of an ad hoc safety net offered by governments to those affected.

Jad Ariss, managing director of The Geneva Association, said: “It is a tragedy that businesses, particularly SMEs, have suffered so much financial loss during the pandemic as a result of the lockdowns, which were beyond their control.

“The public sector had to step in with multi-trillion dollar emergency relief measures. Governments and insurers must work together on how to close the massive protection gap exposed by COVID-19, with governments as the leading players.”

Kai-Uwe Schanz, head of research and foresight at The Geneva Association and the leading author of the report, said: “We want to emphasise that of the four pandemic risk insurance schemes outlined, distributing cash post-event – as many governments did for COVID-19 – is likely least effective. For the other schemes, deciding whether participation is mandatory or voluntary, as well as the role of insurers in pricing and offering coverage, are critical considerations. We hope this report effectively guides governments and insurers in finalising their partnership terms.”

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