GVNW’s Mahnke renews call for state-backed solutions for systemic risks

Alexander Mahnke, chairman of the German risk and insurance managers’ association GVNW, has renewed calls for a public-private partnership (PPP) to help deal with future systemic crises such as the Covid-19 pandemic, in his opening address at the association’s annual symposium today.

The global spread of Covid-19 demonstrates that pandemics present, at least under the status quo, an uninsurable risk.

Mr Mahnke argued that the German government’s scattergun and reactive approach of throwing money at the problem could be refined by working with the insurance sector.

Insurers can contribute risk analyses and risk distribution mechanisms to complement the state’s financial resources, he said.

Moreover, the scope for public-private cooperation extends to cyber risks and natural catastrophes, he added.

Mr Mahnke said: “The potential of cyber risks to impact entire industries and the economy at a national level is unfortunately a feasible and indeed realistic scenario.”

This awareness has prompted insurers to avoid risks by adding coverage exclusions and excluding cyber under business interruption cover. GVNW does not support this practice.

Leading industry figures have this week confirmed to Commercial Risk Europe that GVNW members will face another tough round of renewals for cyber insurance.

Mr Mahnke urged insurers to move from avoidance to innovation and work actively with industry to develop new and insurable risk management solutions.

Natural catastrophes are a big issue in Germany following the devastating July floods. The German Insurance Association (GDV) has estimated losses from the summer hail and flooding at €11.5bn.

This has naturally left its mark on insurers’ balance sheets. As natural catastrophes become more frequent, the growing scale of the losses will, like with pandemics and cyber, extend beyond the realms of insurability, at least within the private sector.

The PPP model already exists for terrorism in Germany. So given today’s risk landscape, it’s now time to optimise the potential of combining insurers’ risk expertise with public sector financial muscle.

Mr Mahnke also emphasised that GVNW and the German association of insurance brokers (BDVM) approached their government last year about holding talks on this issue. However, there has been little response to date.

The GVNW will therefore treat the issue as one of its priorities when communicating with the new German government following elections at the end of September.

Mr Mahnke stayed with the theme of insurance needing to be fit for purpose as he addressed the industrial insurance renewals round last year.

D&O and cyber cover were the main drivers of rising premiums, with increases of between 25% and 35%. Moreover, sums insured in D&O contracted from €24m to €10m in some instances.

Mr Mahnke warned against “sudden and brutal changes to policies as they present a reputational risk to insurers”.

He therefore called on industrial insurers to review their practices and improve their response times to avoid a repeat of the unsatisfactory renewals round.

Mr Mahnke also urged insurance clients and providers to improve their speed and cost efficiency when dealing with each other, notably through increased digitalisation. Prompt communication on trends was also identified as an area for improvement.

Sustainability is the theme of this year’s symposium. That is in the context of the environment of course, particularly climate change. However, it also goes beyond the environment to include sustainable business models and constructive cooperation, both among private sector players and between the private and public sectors.

It is important that insurers draw on lessons provided by their recent experiences and apply those lessons to remain fit for purpose, concluded Mr Mahnke.