The Insurance Council of Australia (ICA) has revealed it is working with actuarial consulting firm Finity on a range of options to introduce “some level” of pandemic coverage for future outbreaks.
The global insurance industry has been criticised, most vociferously in the US and UK, for pandemic exclusions which have restricted business interruption and travel payouts.
ICA explained to MPs during this week’s parliamentary hearings that the industry cannot cover pandemics due to the “sheer size” of the exposure. After the SARS outbreak exclusions were introduced in reinsurance contracts and insurers followed suit.
But CEO Rob Whelan also told MPs that it has engaged Finity to see “how insurance could in the future respond more effectively to threats of this kind”.
Finity will link up with ICA and member companies “to work through what a potential approach might be to be able to provide some level of insurance cover for these sorts of extraordinary events”.
ICA Head of Risk and Operations Karl Sullivan told the committee the project will assess broad options “both as an industry and in partnership with governments” to reintroduce cover.
“The numbers are very significant, and it would be a very serious undertaking to build a pandemic pool, a reinsurance pool, to manage the types of losses that might have been sustained if those pandemic exclusions weren’t brought in to maintain the solvency of the market.”
Mr Sullivan says the work with Finity will prepare the industry for discussions with the Government “in the wash-up to the COVID-19 event”.
The work will consider “what options may exist or can be developed to put the insurance industry in a position where they can cover some or most of these types of losses if a similar sort of event were to occur in the future”.
Finity and ICA declined to respond to requests from insuranceNEWS.com.au for further details on the options being considered.
ICA told MPs the work should be completed within two months.
Blog Submission: Peter Sellwood
PALTD InsureRight – Insurance & Risk Management
Contact us today to speak to our insurance specialists for more information.
