Renaud Guidee, the Chief Risk Officer (CRO) of global insurance giant AXA, has told Reuters that France is in the process of drafting a re/insurance backstop for pandemics in light of the significant financial and economic implications of the COVID-19 outbreak.
According to Reuters, a working group set up by French Finance Minister, Bruno Le Maire, and which includes lawmakers, business lobbies, the country’s insurance association and state-backed reinsurer CCR, is currently exploring insurance options to protect against pandemics.
As in much of the world, businesses across France have been hit hard by loss of revenues amid government enforced lockdowns and the implementation of social distancing measures.
However, the lack of a physical trigger and exclusionary language in policies has meant that for the most part, standard business interruption contracts simply do not cover pandemic risks, which, has been met with anger by some policyholders expecting a payout.
In an interview with Reuters, Guidee explained that from an insurance standpoint, “the work would focus on non-damage business interruption.”
He continued to explain that COVID-19 is an “exceptional risk” and one that cannot be diversified owing to its systemic nature and universal reach. As a result, there’s a real need for public – private sector partnerships to adequately and effectively address the issue, he said.
Reportedly, a scheme similar to the countries nat cat backstop is being explored. Under this arrangement, state-backed reinsurer CCR provides a backstop cover against natural catastrophes.
“There will be a layer of losses that would have to be absorbed by insurers. At some point, beyond insurability, then the government would have to step in, just like with natural catastrophes,” said Guidee.
The news comes following similar pushes in both the UK and the U.S. to establish some type of re/insurance backstop scheme to assist with the pandemic.
In France, said Guidee, the aim is to put forward proposals by the first half of June and to get something in place as soon as possible.
“There is a political willingness for such a scheme to be up and running as early as possible, especially if we collectively had to face a second wave of COVID-19 during the year,” he told Reuters.
