While the re/insurance industry can’t do it alone, taking the stance that the sector can’t insure pandemic risk at all is a mistake, according to John Keogh, Executive Vice Chairman and Chief Operating Officer (COO), Chubb.
Keogh discussed the industry’s response to the COVID-19 crisis and its role in future pandemic events during an interview with Aon President Eric Andersen, as part of the re/insurance broker’s series of fireside chats.
“I believe, this company believes that there’s a place for the industry to play a more important and more vital role, as respect to actually insuring some of the things that we don’t insure today, relative to pandemic,” said Keogh.
“And, to that degree, I think there’s a need for this industry to step up and provide ideas, provide thoughts, the right solutions where this industry can play a more important part of helping companies affected by a global pandemic get back up and running again, and provide financial support.”
Underpinned by the ongoing business interruption issue, the coronavirus outbreak has once again brought the industry’s ability to cover systemic risks to the forefront of industry debate. Keogh agreed that public sector involvement is critical in light of the obvious and substantial tail of a global pandemic, but disagreed with the notion that the exposure is completely uninsurable.
“I think taking the position that we can’t insure it at all, and there’s no place for the insurance industry to play a more important role, when and if this happens again, is a mistake. I think we should all come together, and the minds of this industry should be around how we can positively help in the future. And, I think that’s about leadership. I think that’s private sector leadership, and its public sector leadership that’s needed. And, that will be, in the longer-term, something I hope this industry can coalesce around,” explained Keogh.
Andersen agreed, noting that had all of the business interruption claims and everything else related to the pandemic been covered by insurance, today’s discussion would have focused on the financial insolvency of the industry.
“It’s not a failure of the industry, it’s a limitation of our industry, in terms of the amount of capital we can bring, the modelling capability, the ability to actually structure and work with the public sector where necessary,” said Andersen. “But I agree, there is absolutely a role here for the private sector, it has to be in it. It is what we do. We price risk, we understand it, we try and structure it and get it into the capital providers who can make a fair return for the risk. And, so, that has to play a part in this conversation.”
Later in the discussion, the business interruption issue was raised again, and Keogh reiterated that he hopes this is something that the industry explores and looks to do better in the future.
“But don’t take the position that there’s no place for this industry to cover the next pandemic. Don’t do that to the industry. I think that’s foolish, I think it’s tone deaf, and I think it’s intellectually lazy for the industry to take that kind of position,” he said.