The French Insurance Federation (FFA) submits its contribution to the discussion on an exceptional disaster system: the CATEX scheme
Exceptional because of its scale, the Covid-19 has highlighted the limits of the private insurance system, which is unable to respond to a systemic crisis without a specific system.
In order to learn lessons and find the resources to effectively support businesses faced with such events in the future, the FFA, at the end of April and in cooperation with the French Ministry of the Economy and Finance, set up a workgroup to sketch ideas for a future scheme.
As committed earlier to the government, the FFA today presented the conclusions of its work on a new system for protecting businesses against the economic consequences of a major event like Covid-19.
The "exceptional disaster" (or "CATEX") system proposed by insurers would aim to be simple, swift and on a lump sum basis to help insured businesses to make it through cessations or significant reductions in activity associated with an exceptional event such as a pandemic, the aftermath of a terrorist attack, riots or a natural disaster. It could be triggered after a declaration by the State of administrative closure affecting a number of businesses for a specific period and over a particular geographic area.
All VSEs and SMEs (2.9 million in total) affected by such closure would be eligible for this system. It would be included either in policies that include "Fire" cover - which 100% of VSEs and SMEs currently have -, or in policies that include "Business Interruption" cover - which 50% of the businesses currently have.
Indemnity would be on a lump sum basis and paid without any prior loss assessment, in the form of "resilience capital" and it would be intended to indemnify the businesses' gross business interruption, excluding payroll and profit at pro rata of the period of closure.
The businesses benefiting from it would be those directly affected by an obligation to close, but also, in the event of a pandemic, those "ricochet victims" whose activity would have been significantly slowed down.
The "CATEX" system would be funded by a premium paid by the relevant businesses, and via a public–private partnership which would be based on both the natural disaster scheme and the GAREAT (Management of the Insurance and Reinsurance of the Risks of Terrorist Attacks and Terrorism) tool.
Private insurers and reinsurers are ready to commit 2 billion euros of annual indemnity capacity to such insurance cover, above which the State would take over through the CCR, the public reinsurer.
"From the start of the lockdown, we had expressed our willingness to consider solutions to deal with through crises of this magnitude. Once again, we are keeping our commitment and fully playing our societal role. We are the first in both Europe and the world to offer an innovative system to deal with systemic risks like Covid-19. I would like to thank all parties that have been involved in this work which has been delivered in record time. I hope that it will be valuable input to the public debate", said Florence Lustman, president of the FFA.