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Column. A duty of transparency

10/09/2020

The planet is now facing a health crisis for which the length and repercussions are still difficult to assess. We insurers, are aware of the distress of entrepreneurs whose activity stopped overnight, with a brutality that obviously cannot leave anyone insensitive. It is therefore essential to quickly draw the first lessons from this crisis and to build together a mechanism that will make it possible to better protect companies in the future.

Insurers have strongly committed themselves to contribute to the national movement of solidarity. Today, they are participating very actively in the recovery through a massive investment programme, with priority being given to the healthcare and tourism sectors. But it is our responsibility to speak out the truth: a health crisis on the scale of Covid-19 is not insurable by private insurance only: the founding principle of our business is the pooling of resources, which is not compatible with “all the insured having claims at the same time”. Insurance is there to support, repair and indemnify within the framework of its policies, which it has massively done during this crisis. But it can’t do it all.

The situation we are facing is already leading reinsurers - without which insurers cannot manage major risks - to explicitly exclude the pandemic from all their policies on a worldwide basis. The message cannot be clearer: insurers cannot be the only ones to bear the risk of covering the economic damage caused by a pandemic or any other risk of the same magnitude. The very strength of our insurance companies and our ability to meet our commitments to our policyholders is at stake.

In this crisis, business interruption insurance policies have been read in the light of the current pandemic. Due to a lack of understanding by many, the ACPR - the French banking and insurance regulatory body - conducted a survey of business interruption covers and their response to exceptional events such as the coronavirus. The survey concluded that 3% of the policies applied and that, for 4% of them, the clauses did not allow to conclude with certainty whether the covers applied. In the remaining 93% of cases, however, the pandemic was clearly excluded from the policies.

As a result of this study, the ACPR called on insurers to “review the wording of all ambiguous policy clauses for the future and to clarify the general architecture of contracts in order to clearly inform policyholders of the exact scope of their coverage”. In response to this request from the ACPR and the decision already taken by reinsurers, insurers are currently in the process of specifying the exclusion of the pandemic for contracts that justify it. It must now be clear that we, as private insurers and reinsurers, cannot bear such a risk alone.

Inventing new insurance solutions will not stop the pandemic but can contribute to our collective resilience. We must act and find solutions as soon as possible. This is why, as we had committed to do, we submitted proposals to the Government last June to build together a system of protection against exceptional disasters. We, as insurers, are ready to take our share of the risk, but without a State partnership we will not be able to help the victims of an exceptional disaster: financial protection against this type of “macro-damage” can only be found through a public-private partnership.

There is therefore an urgent need to implement these solutions because our duty of transparency forces us to say that if such a crisis were to happen again now, we would once again find ourselves without any protection for the companies that would be affected by it.

Florence Lustman, President of the Fédération Française de l’Assurance

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