Ferma offers risk expertise to EC and urges it to support state-backed pandemic pools

The Federation of European Risk Management Associations (Ferma) has written to the European Commission’s Covid-19 coordinating response team, offering its help with the recovery and re-construction effort. It also suggests a coordinated approach to the creation of state-backed pandemic insurance pools, possibly supported by an EU backup later via the European Stability Mechanism (ESM). Ferma president Dirk Wegener points out in the letter that the private insurance market has provided little relief for Europe’s companies as they battle to cope with the impact of the virus, because pandemic risk is simply too big for the sector’s capital to handle. He states that there are a number of well-established schemes across Europe used to manage extreme risks such as terrorism, natural catastrophes and nuclear industry pools. But Mr Wegener urges an EU-backed coordinated approach to deliver what companies need at this time of crisis and in the future. “Many European businesses face inevitable and sometimes severe financial losses as a result of the pandemic event. Insurance provides little if any cover for these risks, and insurers are introducing more exclusions and tighter conditions as policies renew. We do not expect this to change. Pandemic risk, like climate change and cyber risk, is systemic. It is beyond the capital of the private insurance market to provide material capacity for transfer of risk,” writes Mr Wegener in his letter, which was copied to Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority. “It will probably be necessary to create public-private partnerships for pandemic risk on a national basis, but the EU should help member states. It could, for example, provide expertise such as modelling and rate setting, and startup costs. There is also potential for additional EU support such as an EU backup layer, possibly via the European Stability Mechanism, allowing the convergence of all national systems to a European standard,” he continues. “Europe already has well-established schemes to manage extreme risks like terrorism and natural catastrophes. Examples include the French Caisse Centrale de Réassurance, Spain’s Consorcio de Compensación de Seguros, the UK’s Pool Re, the German Extremus scheme and nuclear industry pools in several countries. These offer possible models for new initiatives, as they have an established process to provide funds to those affected by such risks,” he states. Apart from the creation of state-backed pools, Ferma urges the EC to help reduce the impact of future pandemics though the development of lessons learned from Covid-19 and shared across member states, and the use of risk management tools at organisational, national and European level. The haphazard and at times apparently chaotic response of national governments across Europe and worldwide to the crisis has clearly shown a serious lack of crisis management, business continuity and risk management capability and planning at national level. Ferma is offering the expertise and experience of its national association members, who represent Europe’s biggest companies, to help build better resilience to the benefit all in the future. “Ferma can contribute to this critical discussion. We can provide the necessary theoretical framework from organisational risk management and our experience of managing Covid-19 on the ground in thousands of businesses across Europe,” states the federation. “Covid-19 is having a devastating impact on businesses across Europe. Since the outbreak of this pandemic, the risk managers of European corporates have been doing whatever possible to support their companies and their national governments to reduce the impact of Covid-19 and protect our societies. Risk managers are already involved in planning for successful recovery,” it adds. “It is essential to learn from the experience of Covid-19 to use risk management to mitigate the impact of future pandemics at organisation, national and European level. We will collect the feedback and conclusions of this crisis throughout our membership and report our findings to the commission,” continues Ferma.

Ferma offers risk expertise to EC and urges it to support state-backed pandemic pools

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