This is what the insurance industry thinks of a ‘crisis of confidence’
A few weeks ago, insurance companies were calling for an end to the “crisis” of confidence that had gripped the market in the wake of the Paris terrorist attacks.
But with more than 10 million people having lost their coverage and insurers offering limited reinsurance, that call was drowned out by calls for a “cascade of reforms”.
The US, Australia and New Zealand are the most recent jurisdictions to impose new limits on COVID-19 reinsurance.
The UK, France, the Netherlands, Denmark and Canada are among those countries that have banned or severely limited coverage.
What’s the deal?
While reinsurance has long been one of the industry’s most popular and reliable sources of protection against COVID, it has come under increasing scrutiny since the outbreak.
COVID was first identified in the US in December 2014, when coronavirus patients in Massachusetts showed symptoms and hospitalisations were increasing.
That led to calls for reinsurance to be made mandatory, with insurers required to make sure they had sufficient reinsurance in place.
Insurers quickly realised that the only way to make this work would be for the US to get on board the reinsurance bandwagon, with the US government proposing a new law in February 2017 to require it.
But that law was watered down in March and the US remains far from having a national plan.
Insurer demand has been high over the past year, with most insurers pushing for new reinsurance plans, and some saying that they would be forced to take on new COVID patients if the new law didn’t take effect by mid-2019.
Meanwhile, a new government study commissioned by the US Insurance Institute for Highway Safety (IIHS) found that only 20% of US drivers were covered by insurance when they needed it, while in the UK it was 80%.
The UK has a similar situation, with only 20%, but the study found that the UK was “the most robust” country in terms of reinsurance uptake.
“In the UK, we had an increase in COVIDs and a decrease in COVD [co-infection],” says IIHS executive director Mark O’Neil.
“We’ve had the highest number of COVID infections in the EU, so it is not a coincidence that COVID incidence has been increasing across the European Union.”
The UK government, meanwhile, is set to introduce a raft of new measures, including new caps on COV-19 travel and COVID coverage, with some experts expecting it to take a year to implement all of the new policies.
What do insurers say?
While the reinsurers are calling for a ban on COID-19 coverage, some are arguing that the current plan is too generous.
Insurance companies are concerned that the costs of COID insurance will increase as more people are diagnosed and that it will also increase the risk of COVI.
But the reinsurer lobby says it would not have been able to survive without COVID insurance.
“With the new regulations in place, reinsurance will remain a viable option for the foreseeable future,” says insurance industry executive vice-president Scott McBride.
“It’s a matter of balancing risk with benefit, and that balance is going to change over time.
We’re going to have to do our part to ensure COVID continues to be covered in the United Kingdom.”
The US has seen a dramatic rise in COVI cases, which are estimated to have reached over 1,500,000 last year.
Insurance company claims and claims-based reinsurance are currently the only options in the country for COVID survivors, but there is some evidence to suggest that the US may soon be looking to introduce reinsurance for all of its citizens.