GFIA warns that insurance industry stability threatened by retroactive cover

The Global Federation of Insurance Associations (GFIA) has said that asking insurers to retroactively cover pandemic losses that were not included in existing policies could seriously threaten the stability of the global insurance industry. It said retroactively changing the terms of policies would not be an appropriate way to address the large-scale financial impacts of the Covid-19 pandemic. Instead, the GFIA has also called on governments and regulators to relax requirements for paper-based or in-person communication and encourage the digital delivery of insurance documents. It also urged them to allow exceptions to measures related to the restriction of the movement of people and instructions to businesses to close or scale down operations, “to allow (re)insurance companies to maintain their operations, so that they can continue to provide the insurance coverage and pension savings products that their customers demand”. In a statement, the GFIA said: “The global insurance industry is an essential stabilising force throughout the world. Insurers have always contributed, and always will contribute, towards developing solutions to the greatest challenges facing individuals, businesses and governments, especially during major catastrophes and societal upheavals. As the world grapples with the Covid-19 pandemic, insurers remain focused on honouring their promises to customers.” It noted: “Many companies, either individually or collectively through their industry associations, are also taking voluntary steps to contribute in other ways to help stem this health crisis and to prepare for the ultimate recovery that will follow. These steps will also include active engagement regarding the development of both short- and long-term legislative solutions to address pandemic risks.” However, it pointed out that without the continued financial stability of the insurance industry, insurers will not be able to continue to respond to the crisis or to honour their obligations to customers under existing policies. “Where coverage for pandemics and other causes of loss were not included in existing policies or reflected in premium payments, requiring insurers to cover those losses retroactively could seriously threaten the stability of the global insurance industry. Events such as fires, motor vehicle accidents and natural catastrophes covered by insurance do not stop, even during a pandemic. At the same time, insurers manage their financial strength in order to meet the promises and guarantees made to customers, whether they are related to the pandemic or not. As such, retroactively changing the terms of policies would not be an appropriate way to address the large-scale financial impacts of the Covid-19 pandemic,” stated the GFIA. In its statement, it further explained: “Such actions could threaten the entire financial stability of the insurance industry and significantly undermine insurers’ ability to pay other types of claims. In turn, this could exacerbate the negative impacts the economy is currently experiencing.” On the issue of the solvency and business continuity plans of insurers, the GFIA noted that some regulators and supervisors around the world have implemented additional data calls and requests for information from insurers. “While these are jurisdictional decisions in the remit of supervisory authorities, coordination between governmental authorities – and the allowance of some flexibility to account for existing administrative burdens – will be very important in allowing the industry to concentrate time and resources on serving policyholders and confronting the pandemic,” it stated.

GFIA warns that insurance industry stability threatened by retroactive cover

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