Requiring insurers to cover Covid-19 related losses retroactively could seriously threaten the stability of the global insurance industry, the Global Federation of Insurance Associations (GFIA) warned on Monday April 6th.
It notified governments worldwide of the danger of forcing insurers to pay out for losses suffered due to the coronavirus, even when pandemic losses were not included in existing policies.
Several US states have introduced bills that would force insurers to pay on business interruption policies, even if pandemics were not included in the policies.
The GFIA said that, as the world grappled with the Covid-19 pandemic, insurers were focused on honouring their promises to customers. It said that it understood that governments around the world and international organisations were fulfilling their necessary duties to respond to the crisis: both in protecting the health of their citizens and in supporting the businesses that drive their economies. GFIA said that it appreciated that central banks, governments and international organisations had put forward proposals targeting flexibility in respect to some regulatory and data collection requirements.
As governments around the world implemented emergency response measures, GFIA asked that they consider the following points:
The continued financial stability of the insurance industry was vital. Without it, insurers would not be able to continue to respond to the crisis or to honour their obligations to customers under existing policies. The industry was committed to helping governments meet the financial needs of citizens and businesses. However, GFIA pointed out that “where coverage for pandemics and other causes of loss were not included in existing policies or reflected in premium payments, requiring insurers to cover those losses retroactively could seriously threaten the stability of the global insurance industry”.
Insurers managed their financial strength in order to meet the promises and guarantees made to customers, whether they were related to the pandemic or not. “As such, retroactively changing the terms of policies would not be an appropriate way to address the large-scale financial impacts of the Covid-19 pandemic. In fact, such actions could threaten the entire financial stability of the insurance industry and significantly undermine insurers’ ability to pay other types of claims”, GFIA said.