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EIOPA Offers Proposed Public-Private Pandemic Resilience Solutions

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July 31, 2020

The European Insurance and Occupational Pensions Authority (EIOPA) has presented a proposed public-private "shared resilience solution" for future pandemics.

EIOPA's Issues Paper on Shared Resilience Solutions for Pandemics acknowledges that private insurance alone is unable to protect society against the financial consequences of future pandemics and suggests that solutions require both public and private sector involvement.

Those solutions would be based on four key elements, according to EIOPA: proper risk assessment, risk prevention and adaptation measures, appropriate product design, and risk transfer.

Four principles would underly a shared resilience solution, according to EIOPA.

  • A shared resilience solution would require the sharing of costs and responsibilities across the relevant parts of the private and public sector in a meaningful manner ("skin in the game").

  • An efficient shared resilience solution will require an element of central coordination across public and private entities.

  • Any solution involving the public and private sectors would be conditional upon implementing efficient and effective prevention and adaptation measures.

  • A shared resilience solution can only insure against a portion of the economic costs of a pandemic.

The paper offers various options, including several to improve coverage of nondamage business interruption (NDBI) associated with pandemics. Among them are providing simple and transparent NDBI pandemic coverage, targeting NDBI products at small and medium-sized enterprises, and offering parametric insurance coverage for NDBI pandemic risks and a layered shared risk-transfer solution involving insurance, reinsurance or capital markets, national governments, and Europe.

The EIOPA proposal has won the support of the Federation of European Risk Management Associations (FERMA), which urged European institutions to act on its ideas.

"FERMA believes that a public-private insurance-based solution, based on a sound foundation of risk management, is essential to support European enterprises against pandemic," the organization said in a statement. "It also argues that, even though there is action in some member states, European-level involvement is necessary to create resilience across the Single Market. Pandemic has no borders."

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