According to a report from the Guardian, Lloyd’s of London CEO John Neal has proposed a deal with the UK government to help the NHS meet unexpected costs triggered by major events like the pandemic, as well as government cover for floods or droughts.
The Guardian said that Neal “floated the possibility” of providing bespoke insurance contracts to the NHS when he met Chancellor Jeremy Hunt last month.
Lloyd’s of London’s chair, Bruce Carnegie-Brown, commented, “One of the challenges the government has is around peak demand in the NHS relative to NHS budgets. If we can provide an insurance solution that effectively funded the NHS if it breaches its capacity, or budget issues, then it would show the insurance industry responding in a positive way to something that was caused by an exogenous event.
“Obviously things like a pandemic might cause very dramatic increases in demand on the NHS and its resources.”
Carnegie-Brown highlighted the fact that it has long been difficult to get the government to partner with the private sector because of a “level of mistrust on both sides”. Though, he observed the success of some public-private partnerships, such as the formation of Pool Re.
The structure of the potential NHS cover is currently unknown, though products such as insurance-linked securities could play a major role.
Carnegie-Brown continued, “It’s about understanding what the government’s risk parameters are around these kinds of issues, and historically the government has borne 100% of the risks.
“What we’re saying is that the private sector could take a share of this risk, but we would need to explore the precise terms on which we did that.”
However, according to the Guardian, the Treasury downplayed the idea, with a government spokesperson stating, “While we appreciate the important role the insurance sector plays in building resilience to future risks, it generally does not represent good value for money for central government to purchase commercial insurance.
“The government is committed to strengthening our own systems and capabilities that support our collective resilience against systemic risks.”
Meanwhile, Lloyd’s suggested that it would continue to work with both the public and private sector to discuss the value insurance can add to protecting against risk.
As mentioned, it has also offered services towards the UK’s climate transition plans, as the frequency and severity of storms and flooding continues to grow.
Carnegie-Brown concluded, “Again, a bit like the NHS, the government owns all of the risk today if there is an extraordinary event. We think the insurance industry can be a partner with government in reducing the elements of risk.
“It doesn’t work if the losses are expected and the premiums become too expensive … we want the government to be proactive about that rather than reactive.”
