FERMA urges European Commission to help mitigate pandemic risks
The Federation of European Risk Management Associations (FERMA) has urged the European Commission to use lessons from the current COVID-19 pandemic to apply good risk management practices to mitigate future pandemics.
FERMA president Dirk Wegener, on behalf of 21 member associations across Europe, has asked the EC to support public-private partnerships to increase financial resilience against future pandemic risks for economies and communities.
"It is essential to learn from the experience of COVID-19 to use risk management to mitigate the impact of future pandemics at organisation, national and European level," Wegener said.
The association also noted that as pandemic is a systemic risk, the re/insurance industry cannot by itself provide material amounts of risk transfer. Wegener said that COVID-19 is having a devastating impact on businesses across Europe.
"Many European businesses face inevitable and sometimes severe financial losses as a result of the pandemic event. Insurance provides little if any cover for these risks, and insurers are introducing more exclusions and tighter conditions as policies renew. We do not expect this to change. Pandemic risk, like climate change and cyber risk, is systemic. It is beyond the capital of the private insurance market to provide material capacity for transfer of risk."
FERMA stated that "it will probably be necessary to create public-private partnerships for pandemic risk on a national basis, but the EU should help Member States.
"It could, for example, provide expertise, such as modelling and rate setting, and start-up costs. There is also potential for additional EU support such as an EU backup layer, possibly via the European Stability Mechanism (ESM), allowing the convergence of all national systems to a European standard."
Wegener pointed out that Europe already has well established schemes to manage extreme risks like terrorism and natural catastrophe, such as the French Caisse Centrale de Réassurance, Spain’s Consorcio de Compensación de Seguros, the UK’s Pool Re, the German Extremus scheme and nuclear industry pools in several countries.
"These offer possible models for new initiatives, as they have an established process to provide funds to those affected by such risks," he concluded, adding that the association will collect feedback and experience from its member associations to share with the Commission.
