Public-Private Solutions to Pandemic Risk

Pandemic business interruption risk is uninsurable by insurers alone, as it cannot be modelled and priced, it is systemic in nature, and maximum losses are not manageable from the insurer’s solvency point of view. Governments must play a leading role.

This second report in The Geneva Association's research series on pandemics and insurance explores four exemplary and generic types of public-private pandemic risk solutions – direct insurance, reinsurance, social insurance and post-event protection – and compares the benefits of each against seven public policy objectives. Insurers can bring to bear their expertise across a broad spectrum, ranging from pricing and offering limited coverage to distribution and administrative support.

The first report in this series, An Investigation into the Insurability of Pandemic Risk, demonstrated that pandemic-induced business continuity risk defies criteria for insurability in the private market. The maximum possible loss is not manageable from the insurer’s solvency point of view. Governments, therefore, need to get involved as ‘insurers of last resort’.