French pandemic insurance scheme plans near completion: AMRAE

The working group created by the French Ministry of the Economy and Finance to investigate the best form of state-backed insurance scheme to cover pandemics will present its review to the ministry within the next few days, according to French risk and insurance management association AMRAE.

The association is an official member of the working group that was created on the orders of French minister of the economy and finance Bruno Le Maire. AMRAE president Brigitte Bouquot told Commercial Risk Europe that the group’s report will be presented to Mr Le Maire shortly.

She said no structure has been decided yet as there are a number of options, including counterproposals for the range of lawsuits brought against insurers for denial of pandemic claims under business interruption policies.

“Schemes in order to pool insurance for pandemic or sanitary catastrophe have been proposed by the FFA (French Insurance Federation) and the CSCA (insurance broking group) but nothing is decided. AMRAE has asked for incentives to promote resilience through risk management and self-insurance for business in order to avoid and reduce systemic losses, as a first step, and to support a true NDBI market, as a second step, supported by the state,” explained Ms Bouquot.

The FFA’s proposal includes pandemic risks as part of a wider range of risks including terrorism, riots and natural catastrophes.

“The ‘exceptional disaster’ (or CATEX) system proposed by insurers would aim to be simple, swift and on a lump-sum basis to help insured businesses make it through cessations or significant reductions in activity associated with an exceptional event such as a pandemic, the aftermath of a terrorist attack, riots or a natural disaster. It could be triggered after a declaration by the state of administrative closure affecting a number of businesses for a specific period and over a particular geographic area,” explained the FFA when it launched its plan earlier this month.

“All VSEs and SMEs (2.9 million in total) affected by such closure would be eligible for this system. It would be included either in policies that include ‘fire’ cover – which 100% of VSEs and SMEs currently have, or in policies that include ‘business interruption’ cover – which 50% of the businesses currently have,” continued the federation.

Under the FFA’s plan, indemnity would be on a lump-sum basis and paid without any prior loss assessment, in the form of “resilience capital”, and it would be intended to indemnify the businesses’ gross business interruption, excluding payroll and profit at pro rata of the period of closure.

The businesses that would benefit from this cover would be those directly affected by an obligation to close, but also, in the event of a pandemic, those “ricochet victims” whose activity would have been significantly slowed down.

“The CATEX system would be funded by a premium paid by the relevant businesses, and via a public–private partnership that would be based on both the natural disaster scheme and the GAREAT (Management of the Insurance and Reinsurance of the Risks of Terrorist Attacks and Terrorism) tool,” continued the FFA.

The federation said private insurers and reinsurers are ready to commit €2bn of capacity to the scheme, above which the state would take over through public-sector reinsurer CCR.

“From the start of the lockdown, we had expressed our willingness to consider solutions to deal with crises of this magnitude. Once again, we are keeping our commitment and fully playing our societal role. We are the first in both Europe and the world to offer an innovative system to deal with systemic risks like Covid-19. I would like to thank all parties that have been involved in this work which has been delivered in record time. I hope that it will be valuable input to the public debate,” said Florence Lustman, president of the FFA.