July 20, 2020, 8:45 am
Hannover Re boss Jean-Jacques Henchoz is urging governments and insurers to negotiate quickly about joint coverage of pandemic risks.
“Partnerships between the state and the private sector are necessary,” said the head of the world’s third largest reinsurer of the “Neue Zürcher Zeitung”. There are already “encouraging debates” between governments and representatives of the insurance industry. Risk awareness is currently “extremely high”, which is why the discussion should be conducted “quickly and specifically”. In his opinion, however, the political process should take a few years.
The insurance industry alone could not possibly shoulder a risk like the current coronavirus pandemic, said Henchoz. Capital market solutions such as the World Bank’s pandemic bond were not enough as the sole answer. “Right now, the capital market could possibly finance $ 2 billion in risks in the form of pandemic bonds.”
Henchoz basically sees two options for state-private cover for pandemic risks: a pool solution with a state rescue facility, similar to cover against terrorist risks, as developed after the attacks on America on September 11, 2001. “This is how Extremus came about in Germany or Pool Re in Great Britain,” he said. As a second possibility, he sees compulsory pandemic insurance as a mixed-economy organization – “similar to what is already available in Switzerland with natural hazard insurance”.
220 million euros put aside
The manager advocates that the states of the European Union agree on a uniform model. “Global insurance companies do not really get their bearings when there are different national supervisory systems.”
Henchoz hardly dares to estimate how expensive the corona crisis will cost Hannover Re. The group has good data available in life and health reinsurance and can predict mortality rates fairly accurately. In property and casualty reinsurance, the situation is much more demanding. “Who knows how Corona will affect the business with credit and surety reinsurance, especially since the state has helped companies out with subsidies in many places?”
In the first quarter, Hannover Re set aside 220 million euros for insured pandemic consequences such as the cancellation of major events. (dpa-AFX)
Photo: Hannover Re