The Federation of European Risk Management Associations (FERMA) has set up a taskforce to create proposals to address the issue of business interruption (BI) coverage for catastrophic risks.
“Our aim is to support the creation of economies that are resilient in the face of systemic and catastrophe risks,” said FERMA president Dirk Wegener in a statement.
The task force, consisting of senior risk managers from FERMA members, plans to publish its initial results by the end of May.
FERMA and the member associations want to open a dialogue with all relevant stakeholders, including EU institutions, insurers and brokers, and government bodies.
The federation has also called for a discussion among these stakeholders to create a holistic solution that provides cover for non-damage BI for all types of catastrophe risks, not just pandemic risks.
Mr Wegener said, “FERMA’s member associations are composed of people with great knowledge of business risk management and business insurance. We intend to draw on that expertise to make concrete proposals to form the basis of discussions with stakeholders.”
According to the press release, the impact of CAT events, like the current pandemic, are beyond the resources of the private insurance industry and enterprise risk management alone. The absence of BI cover without a requirement for physical damage – or non-damage BI – is a critical issue. It affects all sizes of business, but especially SMEs.
BI insurance covers typically require some form of physical damage, such as from fire or flood, to trigger the cover. Many policies have exclusions for non-damage BI for infectious diseases.
Several European countries have existing public-private partnerships to cover extraordinary risks. The landscape is diverse and, inevitably, each has strengths and weaknesses. The taskforce believes it will be essential to avoid easy solutions.
Mr Wegener said, “Any catastrophe mechanism for BI must be able to respond to various types of disaster, address the complexities of catastrophes and avoid the pitfalls of existing schemes.” M