22 September 2020Actuarial & underwriting

Number of captives writing pandemic coverage set to grow: Marsh

At least 25 captives managed by Marsh are writing coverage for pandemic risks, according to a Marsh report titled Captives Offer Value in Uncertain Times.

Marsh predicted more captives will start offering pandemic coverage in coming months, especially where state backed pandemic reinsurance pools are developed to help insurers manage their exposure.

Public private partnerships have emerged as an effective long-term solution for pandemics, with a number of proposals currently under consideration in the US and Europe.

“Across Europe, discussions are taking place among stakeholders — including risk management associations, insurers, and regulators — about creating state-backed insurance pools to protect businesses from pandemic risk,” said Marsh.

“Additionally, there have been calls for a pan-European resilience framework to address all non-damage business interruption (BI) risk, which the European Commission and local regulators support,” it added.

In the US, the leading proposal is a Pandemic Risk Insurance Program (PRIA), modelled on the Terrorism Risk Insurance Program (TRIA) that was developed after 9/11.

Marsh noted that “a significant number of captives” offer terrorism coverage that is reinsured under TRIA. More companies might use captives to access a pandemic equivalent, it added, given that more companies are exposed to the pandemic.