Pandemic risk is uninsurable: VCIA keynote

A pandemic is not an insurable event according to industry expert and economist Dr Robert Hartwig from the University of Southern California.

Hartwig gave the keynote address at the Vermont Captive Insurance Association Virtual conference on Tuesday, speaking about the market and how it may recover from Covid-19.

At the end of the day Dr Robert Hartwig gave a keynote on the insurance market and how it may or may not recover from Covid-19.

He told delegates that he believed that a pandemic did not meet the requirements of an insurable risk.

“It’s my view that generally speaking large scale pandemic risk is not [an insurable risk],” he said.

Hartwig also spoke about the “uninsurability of mass market business continuity risks from viral pandemics” which he has recently written a paper on.

“Conclusions are broader than that in terms of the insurability of pandemics in general on the property/causulty side” he said. “But I do conclude that there is an appropriate role for government.”

Later in a section of the keynote titled ‘Why Pandemic Risk Insurance Act (PRIA) is a bad idea’ Hartwig also outlined why he does not support PRIA.

And while there are losses in the market due to the pandemic, Hartwig’s data analysis in the keynote showed that it’s not all doom and gloom for the future.

Hartwig spoke at length about “major and rapid changes” in the reinsurance market, including communicable disease exclusions, and the current state of capital in the industry.

“The industry’s capital situation is actually rather strong,” Hartwig said, although warned that it would be difficult to predict what may happen in the future.

“2020 is going to be hit but it’s very very difficult to assess where we are going to end up,” he said.

The clinical associate professor of finance at the University of Southern California said that there would most likely be a decline in premium growth this year.

However he warned that we weren’t in a “worst case pandemic situation” and that things may change as the virus spreads and lockdown rules go forward and back.

“[The pandemic] was a black swan event because of the closures, not because of the pandemic,” he said.

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