European risk managers can rely on the insurance supervisory community to continue to back the renewed campaign for public-private partnerships (PPPs) to help provide adequate coverage for future systemic risks, based on a presentation by Fausto Parente, executive director of the European Insurance and Occupational Pensions Authority (Eiopa), at this week’s Ferma Talks event.
Ferma has used its two-day event to reignite the push for PPPs to provide coverage for systemic risks such as pandemics, cyber and natural catastrophes at both national and EU level.
There was a positive start to the campaign in Europe and the US early last year, as leading risk manager, broker and insurer representatives combined to call for state-backed solutions in light of the failure of the majority of business interruption policies to respond to Covid-19 lockdowns.
Eiopa joined the campaign by issuing its own paper. It suggested that PPPs are the way ahead to help deal with future crises. It agreed with Ferma that such structures should be focused firmly on risk prevention and management, using the expertise of the insurance sector to manage claims and price the risk before any state or EU backing kicked in.
It also suggested that the capital markets could be persuaded to further diversify the risk, supplementing the traditional insurance and reinsurance sector.
But as the pandemic dragged on and the scale of the economic losses became clear, political will to take these ideas forward at national level – notably in the UK, France and Germany – and within the EU appeared to dry up.
A number of senior EC and European parliament representatives have taken part in this week’s Ferma Talks event and provided the federation with the chance to reignite the debate.
The support of the supervisory community will clearly be key to the success of this effort, so the positive words from Eiopa’s executive director will be welcomed by the entire risk and insurance community.
“The protection gap shown by the pandemic was only one part of the protection gap and this is something we have been working on for a while. The protection gap is huge for the European market and worldwide. We have an idea of an answer to this, to put in place a shared resilience system based on prevention and insurance, which would make society more resilient in future,” said Parente.
“This represents the big picture and involves both public and also private sectors. We issued a paper calling for political appetite to develop such a system. The key is prevention and insurers can play a role in mitigating the risk,” he continued.
Parente stressed the role that insurers can play in preventing and managing systemic risk. Both he and the risk sector are well aware that national governments and the EU will not support a structure that merely relies on taxpayers’ money to bail out businesses and their insurance partners.
“We wanted to stress the role that insurance can play in prevention. Coverage can be offered on the basis of prevention and then an insurance mechanism can play a role. The capital markets can also participate by diversifying the risk beyond the traditional system of insurance and reinsurance. This can be part of the plan if there is enough political support to help cope with future crises,” added Parente.
Given that the EU’s grand plan looking forward is based on building a more resilient and sustainable European economy that is better equipped to deal with future shocks, you would assume that the PPP concept should gain political support.
But given the scale of the economic recovery task that lies ahead for all EU member states, the risk and insurance community will have to work hard to present a united and focused set of proposals at both national and EU level. Cooperation with the supervisory community will be critical to the success of this project, so Parente’s support could be key.