Systemic risks top agenda as German  risk managers meet for GVNW

The new German government that will be installed after national elections on 26 September can expect to hear from its risk and insurance management community on the need for greater state involvement in the battle against systemic risks such as pandemics, natural catastrophes and cyber. The German insurance management association GVNW meets on 9-10 September for its virtual annual Symposium, and the need for renewed effort on some form of public-private partnership (PPP) to deal with systemic risks will be one of the main topics of debate. Last year, amid the height of the Covid-19 pandemic, GVNW teamed up with the German brokers association (BDVM) to submit a paper suggesting how a state-backed scheme could work to help deal with future health crises and wider systemic risks that the commercial insurance sector cannot deal with alone. On Friday morning during the GVNW Symposium, the keynote speech will be given by Dr Hans-Georg Jenssen, managing director of the BDVM, who will focus on the following big question: ‘Pandemic risk: can PPP models help?’ Alexander Mahnke, president of the GVNW, concedes that little progress has been made on this important topic since last summer. But he told Commercial Risk Europe shortly before the Symposium that the association is in no mood to give up and stressed again that any scheme should not be limited to pandemics. “We are convinced this [PPP solution] is still possible and necessary when it comes to pandemic risk. We have said from the beginning that this should not just be limited to health crises. While we are lobbying for such a vehicle with a focus on pandemics for now, this should not be exclusive. Cyber or nat cats can also create scenarios where the insurance market will not be able to respond,” said Mr Mahnke. “Unfortunately, we have not been very successful with this effort so far but more large insurance companies and their underwriters have started to ‘blow into the same whistle’. “But, at the end of the day we need to look at private-public partnerships schemes in order to face these scenarios collectively,” continued the GVNW leader. “From the public side we have not got much of a response. But we will continue the effort. You will hear about this during our Symposium. I hope that one day we will have a discussion on a national and European basis,” added Mr Mahnke. Pandemics remain front of mind of course, but evaporating cyber insurance for GVNW member companies and fast-rising losses will surely mean that any PPP discussions will also cover this critical risk. Flood risk The new German government will also be hearing from the German Insurance Association (GDV) as it seeks to discuss potential solutions for systemic risks. It is now more focused on natural catastrophes in the wake of the massive damage caused by the recent floods and hail in Germany and neighbouring countries. The GDV recently confirmed that these losses will make 2021 the costliest natural hazard 12 months for German insurers in at least 50 years. The GDV, which presented its own proposals to the German government last year on a potential PPP to cover pandemic risk, has stressed heavily during the last few weeks how relatively little of the nat cat losses have been uninsured. Nationwide, nearly all residential buildings are covered for windstorm and hail. However, only 46% of homeowners have protection against other natural hazards such as heavy rain and floods, said the GDV. Action is needed to tackle this problem at state level to help promote loss prevention, risk management and potentially mandatary cover, argued the association. The GDV recently announced that it will present proposals shortly on how nat cat risks can be more effectively tackled on a cost-effective basis. “Together with our member companies, we will be presenting ideas by autumn on how the spread of natural hazard insurance can be significantly increased at risk-based prices. It is also important to reach those who, despite the recent flood disaster, do not want to believe that they too can be affected by natural hazards,” explained GDV managing director Jörg Asmussen. “Everything must be done to prevent damage through protective measures or at least to significantly reduce its extent. The German insurers are therefore in favour of a new overall concept for climate-change adaptation consisting of education and binding measures for private and state prevention and insurance,” he continued. The GDV stressed, however, that mandatory flood insurance without robust incentives for better loss prevention and risk management will not work. “As a single instrument [mandatory insurance], we reject it because it takes away the incentive to insure against flood and other extreme weather risks… At best, it would make sense if it were integrated into a new overall concept for land and building planning and disaster protection,” said Mr Asmussen. “It is encouraging that nearly half of building owners now have protection against other natural hazards. But for the rest, they should review and adjust their insurance coverage,” he added. The new German government will clearly have a lot on its plate, not least the ongoing economic recovery and need to balance public finances against a backdrop of rising unemployment. But regular polling on what German voters see as the most pressing issues shows climate and environmental topics overtook migration in mid-2019 as the leading issue. The pandemic has, of course, overshadowed all other issues since last March. But concerns over the constantly rising cyber threat at national, business and individual levels is also high up the agenda. Now would seem to be a good time for the German risk and insurance management community to team up with brokers and insurers to push a related-risk transfer solution forward, and collectively aim for a more resilient and insurable economy.

Systemic risks top agenda as German  risk managers meet for GVNW

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