Ferma seeks to re-engage with EC on PPPs at Ferma Talks

Ferma aims to use its coming virtual event on 11-12 October to put proposals for public-private partnerships (PPPs) for catastrophe risks “back on the agenda,” federation president Dirk Wegener told Commercial Risk Europe this week. With a number of senior European officials and insurance industry leaders at the event, Ferma hopes to reignite the discussion. A Ferma Talks session on 12 October devoted to financial resilience will bring together AMRAE president Oliver Wild, group chief risk and insurance officer at Veolia Environnement; Julian Enozi, CEO of Pool Re; Amélie Breitburd, European CEO at Lloyd's; and two members of the European Parliament involved in the topic – Alfred Sant and Stéphanie Yon-Courtin. The presence of such leading stakeholders will provide the opportunity for Ferma to try and reignite the discussion about PPPs that was sparked by the failure of most traditional business interruption (BI) policies to respond to the Covid-19 lockdowns last Spring. National risk and insurance management associations across Europe joined the call for state-backed solutions in partnership with the insurance sector and business, to deal with future health crises and other fast-emerging systemic risks such as cyber and natural catastrophes as the scale of the problem became clear. Ferma was quick to point out that such systemic risks are not contained by national borders and it was the first organisation at EU level to propose a pan-European catastrophe resilience framework. The pan-European effort was boosted when the European Insurance and Occupational Pensions Authority (Eiopa) published a staff paper on measures to improve the insurability of BI risk in light of pandemics in February. This was based on work carried out by Eiopa’s exploratory group, of which Ferma is a member. Ferma also set up a taskforce to carry forward its messages to policymakers, regulators and the wider risk and insurance community, to push for potential solutions. In July, the federation revealed it had contacted the European Commissioner for financial services, Mairead McGuinness, asking to meet and discuss the broad topic of resilience. But, despite initial optimism about PPP solutions to deal with future crises at national and possibly pan-European level, little progress has been made to date. Wegener said the Ferma Talks event next week will hopefully provide a platform to reignite the discussion about such solutions. “We want to put this back on the agenda with the original concept that we proposed in April 2020 – a pan-European catastrophe resilience framework. There has been no principle change since then and the concept is pretty flexible,” Wegener explained. “It is time to revisit that discussion and at Ferma Talks next week we will be trying to get it back on the agenda. We have invited representatives of the EC and hope that they will listen to what we have to say. It is important to stress this is also in line with the wider EC policy on resilience. This is not just about the pandemic but also other systemic risks such as cyber, which has the huge potential to hinder European companies,” he added. The big advantage of PPP solutions is they provide a greater degree of certainty around how future crises will be dealt with. The bitter debate, particularly in the UK, France and the US, over whether BI policies actually provided cover for lockdown-related losses presented businesses with huge uncertainty. Attempts by some US regulators and courts to retroactively open up BI policies to cover pandemic losses threw up major constitutional questions about contract law and certainty. Well-designed PPP solutions that promote good loss prevention and risk management would deliver certainty and take away the need to rely upon the short-term decisions of politicians acting amid a crisis, argued Wegener. “If we want to motivate governments to put taxpayers’ money behind such solutions, they have to be led by risk management and loss prevention, followed by risk transfer. This of course needs to be defined and put in place by policymakers, because business needs legal certainty followed by contract certainty,” he said. “The pandemic has been a very uncertain period because it has not been clear whether the government will step in with support or back out, and it is arguably the same with natural catastrophes in Germany following the recent floods. The advantage of PPP solutions is that you know what you get. Today, it is more a question of how politicians feel it is reasonable to act at the time and whether they have the means to do so,” he added. Asked why the initial impetus and optimism over PPP solutions for pandemic risk appears to have evaporated, Wegener said that, in his personal view, it is mainly because the event had lasted longer than most people initially thought and led to such enormous economic losses. He said policymakers would naturally be focused on the enormous economic costs and assume that, even within a PPP structure, the insurance sector would simply not be able to cope. This perception, however, ignores the central role that risk management and loss prevention would play in such solutions, thus enabling the level of losses to be mitigated in the first place and more accurately priced. The key to moving forward with national governments and the EC will therefore be explaining the concept more fully and making it clear that business and the insurance sector are not simply looking for a taxpayer-funded bail out. The Ferma Talks event provides the ideal opportunity to do so. *To sign up for the free virtual Ferma Talks event 11-12 October, please visit www.ferma-talks.eu

Ferma seeks to re-engage with EC on PPPs at Ferma Talks

Want to read this article?

Read Next

Courage and collaboration needed to manage emerging construction sector risks

Dubai floods put $8bn of aircraft at risk, estimates Russell Group

Parima heads to Manila for first of three conferences this year

Munich Re ‘more likely’ to exceed 2024 profit target after €2.1bn gain in Q1

Insurance Europe calls for EC to ‘get it right’ on Solvency II

Courage and collaboration needed to manage emerging construction sector risks

Dubai floods put $8bn of aircraft at risk, estimates Russell Group

Parima heads to Manila for first of three conferences this year

Munich Re ‘more likely’ to exceed 2024 profit target after €2.1bn gain in Q1

Insurance Europe calls for EC to ‘get it right’ on Solvency II

Want to read this article?

Read Next

Courage and collaboration needed to manage emerging construction sector risks

Dubai floods put $8bn of aircraft at risk, estimates Russell Group

Parima heads to Manila for first of three conferences this year

Munich Re ‘more likely’ to exceed 2024 profit target after €2.1bn gain in Q1

Insurance Europe calls for EC to ‘get it right’ on Solvency II

Related Articles