Ferma calls on brokers and insurers to show flexibility and backs pandemic pool concept

Dirk Wegener, Ferma president

The Federation of European Risk Management Associations (Ferma) has called for “enhanced” understanding of the insurance needs of European businesses to help them battle through the current pandemic and recover afterwards.

The federation also said it does not think the retrospective extension of business interruption (BI) policies to include excluded pandemic risks as suggested in the US is a good idea, but it does support the idea of the creation of state-backed pandemic pools to help cope with future outbreaks.

Ferma president Dirk Wegener said: “Many companies are under great pressure as a result of the pandemic. We need brokers and insurers to work with us as partners at this difficult time. For some businesses, it may be a question of survival.”

The federation calls on insurers to grant flexibility to business customers, as well individual consumers during this difficult period. It said that it welcomes a recent “strong” statement from the European insurance regulatory agency EIOPA, which urged the industry to treat consumers fairly and exercise flexibility in how they are treated.

“The message is for businesses too,” said Mr Wegener. “It is essential that we have continuing access to insurance and that we are kept well informed. We also need insurers to exercise flexibility when reasonable and practical. This applies both to timing and extent of premium payments and claims negotiations. We welcome the support that insurers have put in place so far.”

Ferma also referred to efforts, notably in the US, to retroactively extend BI policies to include pandemic risks that had originally been excluded. Ferma said it would not support such a move and is concerned that such retrospective changes to insurance coverage would create a breach of contract certainty and be detrimental to building a relationship of trust.

Mr Wegener also pointed out that such a move would threaten the stability of the whole insurance system and not serve anyone’s interests. “EIOPA states that imposing retroactive coverage of claims that were not envisaged within contracts could create material solvency risks for insurers. We agree. Forced retrospective changes would jeopardise contract certainty and not help build a sustainable and trusted relationship. A healthy insurance industry will be, among other things, essential for business in recovering from the pandemic.”

Ferma did say, however, that it supports the creation of national pools to cover future pandemic risks as suggested in both the UK and France so far in Europe. Insurance Europe, the representative body for the European insurance sector, has also said it would be willing to support such initiatives.

“National pools have been useful in responding to other severe and widespread risks, such as terrorism. We believe they can be so now. We encourage the European Union to support such developments and ask EIOPA to make proposals. Ferma remains available to provide an expert view from risk and insurance managers,” said Mr Wegener.