By Vincent Liu Liang
Insurers face an uphill task in trying to provide pandemic catastrophe cover due to several factors including difficulty in estimating the economic losses stemming from a pandemic like COVID-19, according to Swiss Re China president Chen Donghui who was speaking at an online seminar on the response and development of the local insurance industry amidst the coronavirus pandemic.
Mr Chen explained that is very difficult to build a risk model as economic loss includes several human factors. At the same time, the economic loss caused by a pandemic is a systemic risk which is difficult to transfer through a normal insurance system.
Moreover, the biggest challenge caused by a pandemic may not be economic loss but in fact the supply of medical resources.
“We can extract a small percentage from the premiums of commercial health insurance to establish a special fund to solve the problem of insufficient elasticity of medical resources when an epidemic occurs,” said Mr Chen.
In today’s low interest rate environment, he noted that another primary challenge facing insurers is to ensure the firm’s financial stability. He said that innovation in terms of pandemic insurance will therefore not be the priority for the international market for a long period of time in the future.
However, he highlighted that the coronavirus pandemic greatly raised insurance awareness and urged insurers to take this opportunity to push the development of relatively simple catastrophe insurance in order to lay a solid foundation for future pandemic catastrophe insurance.
The seminar was hosted by the China Insurance and Risk Management Research Center under Tsinghua University School of Economics and Management and attended by leaders from the China Banking and Insurance Regulatory Commission, the Insurance Association of China and the Insurance Society of China.
Asia Insurance Review