Why We Urgently Need a Pandemic Risk Solution

The COVID-19 pandemic has affected us all. While it is first and foremost a human tragedy, it also has a significant impact on the global economy. Businesses of all sizes and sectors, educational institutions, nonprofit organizations, public entities, and more are acutely aware of the pandemic’s financial and economic challenges. 

At Marsh, our primary responsibility is to advocate on behalf of our clients. This week, Marsh president and CEO, John Q. Doyle, testified during a subcommittee hearing of the US House Committee on Financial Services that the stakes for policyholders are too high for the country to defer action on a pandemic insurance solution.

Now is the time to develop a public-private partnership to help manage and build resilience to the financial risks of a pandemic, be it the ongoing COVID-19 or a future event.

Pandemics are by definition global in nature, meaning that clients and insurers cannot diversify against them as they might with other local or regional risks. We believe there is a need to: 

1. Establish, by working with Congress, a viable insurance market for pandemic risk with sufficient, affordable capacity for all policyholders.

2. Create greater certainty for businesses and their employees during a recurrence or future pandemic. This can be achieved by providing greater clarity in program policy coverage.

3. Facilitate clients’ access to capital from lenders who will require assurance against future pandemic risks.

4. Enhance the resilience of the US economy and its capacity to bounce back more rapidly from a future pandemic event. This can be achieved by linking risk mitigation to premiums, or price and coverage could be impacted by meeting certain risk mitigation requirements. 

5. Support greater investment by the insurance industry, as well as the government, in data collection and modeling tools to help insurers, brokers, and businesses anticipate and quantify potential risks.

To be sure, robust insurance coverage alone cannot mitigate all of the potential economic losses from COVID-19, nor can it fully protect against the impact of future epidemics and pandemics. But a stable pandemic insurance market is essential. And insurers alone cannot shoulder the potentially devastating financial impacts of pandemics.

A Public-Private Solution

Existing public-private partnerships provide important insights into how we can address this peril moving forward. Many governments, including the United States, have successfully built such partnerships to protect against a range of risks, from natural catastrophes to terrorism. It’s our view that a public-private partnership on pandemic risk can offer similar benefits.

If we create the right economic incentives for insurers, policyholders, and the government, insurance can serve its traditional function of mitigating risk. Over time, the right risk program can spur new technologies, ways of working, services, insurance products, and processes to ultimately chip away at the enormous losses associated with pandemics. That, in turn, can help make pandemic risk more manageable and enable our economy to build the resilience it needs for the future.

Reach out to your representatives in the House and Senate and make sure they understand action is needed now. Without a pandemic backstop, businesses cannot properly plan and prepare for what’s to come.