Insurance premiums collected during the pandemic will not cover insurable Covid-19 losses, according to a report by thinktank the Geneva Association.
The report said that global property and casualty (P&C) insurers would have collected business interruption policy premiums for 150 years to make up for projected global output losses related to Covid-19 over the past year.
Among the report’s main findings are that health and life risks for a pandemic resembling Covid-19 pose no fundamental insurability challenges.
However, the report also found that P&C insurers have nowhere near the capacity needed to carry the projected global output losses of more than $4th (£3bn) for 2020.
Jad Ariss, the Geneva Association’s managing director, said: “When Covid-19 hit, insurers moved quickly to provide relief to their customers – for example, through reduced premiums – safeguard their employees, and engage with governments.
“They are promptly paying all legitimate claims where pandemic risk is covered. But, as our research shows, the pandemic exposed a massive protection gap in the area of business continuity risk.”
He added: “We need to find sustainable solutions which harness the industry’s potential contributions while maintaining its solvency and viability.”
Kai-Uwe Schanz, the association’s head of Research & Foresight and the leading author of the report, said: “Insurers are providing meaningful support to people in the areas of health and life during Covid-19.
“But pandemic-induced business losses defy basic, widely-accepted criteria for insurability. Unlike risks like natural catastrophes, they occur on a global scale and are not diversifiable.”
He added: “Governments and insurers urgently need to figure out the right partnership modalities to prepare for – and respond to – extreme risks like pandemics. The Geneva Association’s research will support this endeavour.”