Speaking in an interview with the Financial Times, Mumenthaler acknowledged that re/insurer models had misjudged just how far governments around the world would go to protect their populations.
“The one thing none of us has assumed was . . . the higher weight on human life than we had thought,” the Swiss Re CEO told the FT. “The value of human life got massively higher . . . We hadn’t foreseen that they would close down everything.”
Mumenthaler believes the “whole industry” will be forced to review its models in the wake of the crisis, which is expected to cause a historic economic contraction around the world.
While health and life insurance claims have remained relatively low throughout the pandemic, event cancellation and business interruption claims have taken large financial tolls on re/insurers.
Business interruption claims in particular have sparked a number of legal battles as re/insurers argue their policies were never intended to cover losses from government lockdowns.
“The whole business interruption topic was not on the radar — it was not foreseen,” Mumenthaler noted.
Swiss Re currently estimates that the eventual bill for the P&C industry will be somewhere between $50 billion and $80 billion, with Swiss Re itself expected to pay out around $3 billion.
Many industry leaders, including Mumenthaler, have argued that responses to future pandemic must involve a collaborative approach by re/insurers and governments, possibly with some kind of state funded backstop in place.
“The only viable option in my view is for governments, who had to jump in anyway, to think about what mechanisms they want to have in future to be more effective and efficient in the next pandemic,” Mumenthaler said.
He added that Swiss Re is exploring options to encourage the take up of insurance products by partnering with companies in other industries.
“Buying insurance is a highly unnatural act, according to neuroscience. You have to think about the future . . . buying insurance is a very difficult act,” he told the FT. “What we’re exploring is: can insurance in the future be part of other products?”
Source: Reinsurance News
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