One of the challenges of developing this market, aside from managing accumulation risk, has been the education process required by the potential insured.
Evidence suggests that outbreaks are occurring with ever greater frequency and economic impact as a result of environmental shifts such as deforestation, urbanization and global mobility, epidemic insurance is not a commodity product. It’s very complex to calculate and requires a lot more market education than well-established insurance products. Challenge of developing this market, aside from managing accumulation risk, has been the education process required by the potential insured party. Prior to COVID-19, the risk exposure to individual companies was underestimated.
Non-life ERS products was muted prior to COVID-19. This has significantly changed during the current outbreak. pidemic risk insurance is not necessarily more expensive than other lines of insurance, but of course pricing needs to be risk adequate, reflecting both expected loss and accumulation risk management effort. The concrete premium depends highly on the precise risk insured and the covered area. However, it may be that before the occurrence of COVID-19, many institutions considered their epidemic risk exposure lower than what historical event data and pricing base indicated. The general risk perception will likely have changed now.
ERS offering spans across all lines of business, including non-life insurance, life reinsurance and public sector products. This is due to our approach to accumulation risk management, which is a prerequisite for this offering. Hence, there is not one typical policy wording. However, on the non-damage business insurance side, wordings for certain industry sectors and product features are more standardized. Still, all ERS products / coverage are tailor-fit to the needs of the respective insured and therefore confidential.