Pandemic insurance coverage has existed for a long time, but it has always been expensive and relatively rare. According to the Geneva Association, less than 1 percent of the estimated USD 4.5 trillion global pandemic-induced gross domestic product loss for 2020 will be covered by business interruption insurance.
Pandemic insurance has suffered from both supply and demand limitations. The pay-outs, while sporadic, can be so enormous that they dramatically exceed insurers’ capacity to bear them. And it’s always harder to convince a company to buy insurance that protects against something that hasn’t happened in a hundred years and seems theoretical, according to Ruth Lux, Head of Public Sector, EMEA, Guy Carpenter.
Since the start of this pandemic, we have seen both insurers and reinsurers applying exclusions to pandemic-related risks. This raises the question of how the “protection gap” — the difference between insured and total losses — will be bridged in the face of another future pandemic.