Insurance sector ‘unprepared’ for pandemic – Convex’s Stephen Catlin | News

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The Convex chairman and chief exec questions how the insurance industry can help at a time when government resources are overstretched and the pandemic ongoing

The insurance industry has been caught ‘on the hop’ with the Covid-19 pandemic’s losses, according to Convex chairman and chief executive Stephen Catlin.

Catlin speaking at the International Forum of Terrorism Risk (Re)insurance Pools (IFTRIP) Livestream 2020 last week, said some of the pandemic’s losses are so large that they fall outside of the capital capability of the insurance industry and therefore governments will need to intervene.

“It is a systemic risk that effects the entire world. The cost of the pandemic is way above the cost of the worldwide property and casualty base,” he said.

But he added that both cyber and climate change risk could end up in a similar situation.

The question for Catlin is when these losses fall outside of the insurance market’s capital capability, how does the industry interact with governments to help mitigate their loss?

“The pandemic has really highlighted this. None of us really thought through the financial consequences of a [global] shutdown [for a time period],” he said.

Pandemic Re

Catlin is currently chairing a steering group named Pandemic Re in the UK to examine these losses prospectively. Currently the UK government is shouldering multiple costs with the pandemic ongoing and London being in tier 2 which means that households cannot mix, therefore the time to look at this has been scarce.

Speaking about what the insurance industry could do to help the government under current circumstances, Catlin said the industry could help mitigate risks, distribute and provide first loss policies where the sector pays for the ‘first loss’.

He added that the value of insurance pools are a “well-trodden path” but admits that these systemic risks are individual government risks and so it is impossible to have a global solution for something like the pandemic as it needs to be looked at on a country by country basis.

“The real challenge is working out how you get the money to the insured as quickly as possible,” he stressed.

Overall, he said that the insurance sector must be clearer about coverage for businesses specifically, so that there is no misunderstanding whatsoever in policies, although he admits that this is easier said than done.