Ferma has received a positive response from the European Commission today on its proposals for a public private partnership (PPP) to help business and wider society cope more effectively with future systemic crises.
The commission’s vice president Maroš Šefčovič told Ferma president Dirk Wegener during his presentation at this week’s Ferma Talks event, that the EC is keen to learn from the professional risk management community and insurance sector as it seeks to build a more resilient European economy and society.
Šefčovič did not refer directly to the proposals tabled by Ferma and the insurance sector for formalised PPPs to provide more certainty during crises such as the ongoing Covid-19 pandemic. But he did state that the pandemic has clearly shown the limitations of standard commercial insurance coverage and the need for a more robust approach built upon loss prevention, risk management and risk transfer.
Ferma will be encouraged by Šefčovič’s words as it attempts to reignite the debate about how to structure and implement PPPs at both national and EU levels.
The federation originally proposed an approach to the EC last spring and encouragingly worked with the European Insurance and Occupational Pensions Authority (EIOPA) to table similar proposals. But, despite initial optimism, little progress has been made on PPPs for systemic risks that would ultimately have state and EU backing as reinsurer of last resort.
The Ferma Talks event involves a number of representatives from the EC and European Parliament, providing a real chance to re-open the discussion. Šefčovič’s contribution was encouraging.
The Commission vice president said everyone has to recognise we are in a new era where the lines between public risk and private insurance have become “blurred”. To face up to future challenges – whether health-related, cyber or natural catastrophe – we therefore have to look through “new optics” said Šefčovič.
He said that regular contact between the commission and bodies such as Ferma and the insurance sector will be needed to help build a more resilient Europe that is better prepared for future crises. “We should use this window of opportunity,” said Šefčovič.
While current focus remains on the pandemic, climate change needs to be a big area of future cooperation between public institutions and the private sector from both a risk management and insurance perspective, he said.
“This is very important today. Climate change and environmental degradation have a direct impact on financial stability. Last summer’s fires and floods had a direct impact on energy prices so we see how climate change has direct financial consequences on the economy. But only 30% of economic losses were covered leaving a 70% insurance gap…this is a major question that we need to tackle,” said Šefčovič.
“We need to consider how to increase resilience to pandemics, how to raise awareness and coverage of pandemic-related risks through insurance contracts…we need the insurance sector with supporting capacity and to build good foresight capabilities in the post pandemic environment,” he added.