Joachim Wenning, Chief Executive Officer (CEO) of Munich Re Group, has urged governments and the private sector to pool their expertise and capabilities to tackle systemic risks such as pandemics.
Speaking at Munich Re’s AGM this week, Wenning argued that, as a systemic risk, pandemic is fundamentally “beyond the boundaries” of the private re/insurance sector.
“Resilience is a key attribute of good insurers, yet it cannot be scaled up indefinitely. The boundaries of resilience end where the boundaries of insurability end,” he explained. “That is why we must find new ways of protecting our national economies against the next pandemic.
Last year, Munich Re and other re/insurers proposed a public-private partnership with governments, whereby insurers would provide a minimum level of protection against pandemic risks within a framework of state-backed risk pools.
In this way, it was theorised that insurers would create incentives for small and medium-sized enterprises in particular to implement in-house measures, with governments then liable for losses that exceed the insured amount.
“On behalf of everybody, I urge all of us to create such a strategy and put it into practice soon after conquering this pandemic,” Wenning said during the AGM event.
“Such a solution should be based on predefined criteria and standardised terms. This would save valuable time in an emergency and make an immediate impact.”
But rather than stopping at this, Wenning asserted that a public-private model could also address other systemic risks, and in particular referred to cyber attacks on systemically important networks or critical infrastructures.
“A targeted virus attack can cripple computer systems worldwide in mere minutes, resulting in tremendous economic losses. Just as a pandemic is uninsurable by conventional means, the private sector cannot insure such a digital blackout,” he noted.
“At the same time, providing cover for cyber risks remains one of Munich Re’s top priorities. It is possible to limit cyber risks that do not accumulate or are at most slightly systemic, making it possible to insure them. As in the past, there are considerable market opportunities here,” Wenning went on.
“We aim to continually expand the boundaries of insurability, and that includes cyber risks. But we always exercise due caution so as to not overstep these boundaries.”