Financial stability vital as insurers grapple with COVID-19 challenges

The Global Federation of Insurance Associations (GFIA) has said that requiring insurers to retroactively change the terms of their policies could "seriously threaten" the financial stability of the global insurance industry, which is absolutely "vital" during the ongoing crisis.

"The continued financial stability of the insurance industry is vital," stated GFIA. "Without it, insurers will not be able to continue to respond to the crisis or to honour their obligations to customers under existing policies."

The association believes that where coverage for pandemics and other causes of loss were not included in existing policies or reflected in premium payments, requiring insurers to cover those losses retroactively would not be an appropriate way to address the large-scale financial impacts of the COVID-19 pandemic.

"Events such as fires, motor vehicle accidents and natural catastrophes covered by insurance do not stop, even during a pandemic. At the same time, insurers manage their financial strength in order to meet the promises and guarantees made to customers, whether they are related to the pandemic or not," it noted, adding that "such actions could threaten the entire financial stability of the insurance industry and significantly undermine insurers’ ability to pay other types of claims. In turn, this could exacerbate the negative impacts the economy is currently experiencing."

In addition, GFIA urged the governments to act on requests from their national markets for exceptions or other steps that can be taken to allow re/insurance companies to maintain their operations, so that they can continue to provide the insurance coverage and products that their customers demand.

The association also called for coordination between governmental authorities, and the allowance of some flexibility to account for existing administrative burdens, in terms of regulations relating to the solvency and business continuity plans of insurers.

It also asked for the governments and regulators to relax requirements for paper-based or in-person communication and encourage the digital delivery of insurance documents, as most insurers have moved their operations to work-from-home environments to continue to be able to serve their customers.