© Reuters. FILE PHOTO: Man enters the Lloyd’s of London building in the City of London financial district
LONDON (Reuters) – “Black Swan” reinsurance schemes backed by governments could help businesses get insurance pay-outs after huge shocks such as the coronavirus pandemic, Lloyd’s of London said.
Commercial insurance market Lloyd’s has said insurers worldwide will pay out more than $100 billion in coronavirus-related claims this year.
But many firms are frustrated that their business interruption policies do not cover the pandemic and some in Europe and the United States are in dispute with insurers.
The Black Swan cover could be used to ensure payments after catastrophes such as a cyber attack or solar storm destroying critical infrastructure, as well as for pandemics, Lloyd’s said in a report published on Wednesday.
“Our concern is you solve for pandemic and you don’t solve for the next disaster,” Lloyd’s Chief Executive John Neal told Reuters.
Insurers in Britain, France, Germany and the United States are seeking government-backed “Pandemic Re” cover for future pandemics, similar to existing pooled insurance schemes for damage due to terror attacks.
Neal said that unlike a Pandemic Re, a Black Swan Re would help firms after “multiple systemic exposures”. European risk managers have also called for a broader programme.
Lloyd’s, which has set up a 15 million pound ($18.5 million) seed fund to create new products, is also proposing a government-backed after-the-event product to give small businesses a quick cash injection after a crisis.
And the market is working on a new business interruption policy for its small business customers, to insure sums of up to 100,000 pounds, which Neal said could launch this year.
Britain’s markets watchdog is taking eight insurers to court, including two Lloyd’s syndicates, to clarify whether some business interruption policy wordings should trigger pay-outs.
Customer opinions of insurance have deteriorated as a result of the disputes, the Lloyd’s report found.
The proposals were made in conjunction with Lloyd’s’ global advisory committee, which includes major insurers such as Allianz (DE:) and AXA (PA:).
Disclaimer: Fusion Media
would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.