london, May 10
When much of the global economy locked down last year, insurers, facing estimated losses of more than $100 billion globally, reached straight for their red pens to strike pandemic cover from all new business policies.Denis Kessler, chairman and CEO of French reinsurer SCOR, summed it up when he told a recent conference that pandemic risk was like war.”We exclude war – it’s not insurable,” he said.
But as industries spanning travel and hospitality to construction and manufacturing revert to a new normal, huge demand is causing insurers to figure out how they can put pandemic risk back in policies without making them prohibitively expensive.One example is the film and television industry.U.S. company SpottedRisk has devised a model built on years of data on the political and economic environment of film locations in 150 countries, as well as a year’s COVID-19 shutdown data, to come up with a pricing mechanism to cover the risk of production stops due to the pandemic.”I had been told by 20-plus industry insiders that it was going to be impossible, but we found a way,” said SpottedRisk chief executive Janet Comenos.The company, which declined to name its clients, said its insurance policy has enabled 19 independent film and TV productions with budgets of between $1 and $85 million to film at locations across the globe.
The SpottedRisk policy, which typically costs between $50,000 and $80,000 for $1 million of cover, helps to fill a gap in Hollywood where independent filmmakers have bemoaned the lack of cover, and contrasts with Britain, where a government scheme to enable film and TV production to go ahead has no insurer involvement.While the film industry’s risks are relatively contained over finite periods, industries such as airlines have much higher potential losses and may prove harder to insure, with many insurers saying extensive cover can only come back if governments provide the same kind of backstop they offer for floods or terror attacks in some countries.Insurers do not want to be caught out again, having failed to predict the extent to which economies around the world would lock up to suppress the virus and keep juddering health systems afloat.
“Our modelling does capture infections and mortality,” said Robert Muir-Wood, chief research officer at risk modelling firm RMS.”It didn’t capture all the subtlety of how governments respond, driven by the number of vacant ICU (intensive care unit) beds.” RMS is now factoring those in.Government responses meant that, surprisingly, claims on trade credit, event cancellation and business interruption insurance were higher than for life insurance, industry sources said, because many of those who died may not have held life insurance due to their age.”A year ago, on the non-life side we had essentially no pandemic modelling skills,” said Iwan Stalder, head of accumulation management at insurer Zurich, who has since been engaged in broader scenario modelling for pandemics.
