German risk and insurance association teams with brokers to call for a government-backed pandemic solution

GVNW, the German risk and insurance association has released a joint statement in partnership with the Association of German Insurance Brokers (BDVM) highlighting the need for state and insurance-backed pandemic protection in the future. 

The COVID-crisis has demonstrated how pandemics can cause serious economic damage in a globalised and highly-networked world, they state. Pandemic protection is needed to better prepare for the threat and provide those economically-affected with an independent means of financial support so the German economy is not dependent solely on government grants in such a situation.

Among other things, GVNW and BDVM believe a public private pandemic solution should have some of the following attributes:

  • Coverage must be for all types and sizes of businesses as well as the self-employed and should not be limited to SMEs. It notes that small companies and sole traders have different needs to large industrial companies and this should be reflected in the coverage available.
  • The pandemic protection should be a voluntary solution and not be subject to compulsory purchase.
  • However, incentives must be created to motivate those who may be affected to invest in such “pandemic preparedness”.
  • The Extremus insurance risk pool for protection against terrorist attacks in Germany is a good model for and consideration should be given to expand Extremus to include pandemic coverage. The possibility of creating an independent solution should also be discussed.
  • A pandemic solution should be presented as a “public-private partnership” between the insurance industry and the state. State participation will help ensure risk premiums remain affordable.
  • The pandemic protection should not serve to cover economic impairments occurring below a minimum threshold. A pandemic insurance solution should also go beyond basic coverage and offer additional levels of insurance.
  • As a hedging instrument for large commercial and industrial companies there is potentially a role for risk transfer to the capital markets.
  • The creation of a pandemic risk insurance facility in Germany should not happen in isolation. If a pandemic protection is created, an attempt should be made to harmonise the framework at the European level. A German solution could be a reference model for other EU countries, suggest GVNW and BDVM.