In a collaborative effort with its UK and Global Advisory Groups, Lloyd’s of London has laid out three open source frameworks designed to fast-track global economic and societal recovery from COVID-19.
The first is a non-damage business interruption solution called ReStart.
Lloyd’s says this product would support SMEs reopening and offer a range of limits that ensure it is affordable for customers, without requiring any government support.
Recover Re is an ‘after the event’ insurance product framework that Lloyd’s says could provide immediate relief and cover for non-damage business interruption over the long-term, including the current pandemic.
If implemented, Lloyd’s believes it could be an efficient way to inject commercial and government funds into the economy, providing relief to customers with limited borrowing capacity.
This framework could reportedly be implemented in any country where the government has the resources and industry commitment to support it.
Lastly, Black Swan Re is a reinsurance framework for government and industry partnership that Lloyd’s says could better protect customers from the impacts of systemic catastrophic events – from another pandemic, or global supply chain disruption, to the interruption of critical infrastructure or utilities.
The framework would be designed to provide reinsurance for commercial non-damage business interruption cover for black swan events through industry pooled capital, backed by a government guarantee to pay out if ever the pool had insufficient funds.
Alongside developing and sharing these frameworks, Lloyd’s is developing a Centre of Excellence supported by up to £15 million in seed capital investment.
Lloyd’s says the the Centre will build resource and capability to better understand, model and create products that better protect customers against systemic risks, including pandemics.
This will include new technical capabilities and services to support insurers, and academic partnerships to develop a better understanding of systemic risks and customers’ emerging needs from the insurance industry.
To kickstart the creation of the Centre of Excellence, Lloyd’s Innovation Lab is already working with insurtech companies that can provide some of these capabilities.
“The purpose of insurance is to help businesses and communities manage the risks they face, enable them to recover quickly from disasters by paying claims, and provide the security that allows them to innovate, develop and drive economic growth,” said Lloyd’s Chairman, Bruce Carnegie-Brown.
“COVID-19 has demonstrated that there is much more we can do to support our customers by providing protection for the changing risks they face.
“Some of these risks are of a scale that require partnership with governments globally and this report identifies ways in which the insurance industry could work with governments to share risk and create a braver, more resilient world.”
