Page 159 - COVID-19: The Great Reset

unexpected situation of having to move online. The impossibility to
meet colleagues, clients or fellow traders in person, the necessity

to use contactless payment and the exhortation from regulators to
use online banking and online trading in conditions of remote
working all meant that the entire banking industry had to move
towards digital banking at the stroke of a pen. COVID-19 has

forced all the banks to accelerate a digital transformation that is
now here to stay and that has intensified cybersecurity risks
(which could in turn raise systemic stability implications if they are
not properly mitigated). Those that have lagged behind and

missed the high-speed digital train will find it very hard to adapt
and to survive.

In the insurance industry, many different COVID-19 related
claims have been made under various types of household and
commercial insurance, which include commercial property and

business interruption, travel, life, health and liability (like workers’
compensation and employment practices liability). The pandemic
poses a particular risk to the insurance industry because its

existence and functioning are based upon the principle of risk
diversification, which was effectively suppressed when
governments decided to impose a lockdown. For this reason,
hundreds of thousands of businesses around the world have been
unable to successfully file claims and are either facing months (if

not years) of litigation, or ruin. In May 2020, the insurance industry
estimated that the pandemic could potentially cost more than
$200 billion, making it one of the most expensive events in the

history of the insurance industry (the cost will rise if the lockdowns
go beyond the period under consideration when the forecast was
made). For the insurance industry, the post-COVID-19 challenge
consists in meeting the evolving protection needs of its customers
by building greater resilience to a broad range of potentially

“uninsurable” catastrophic shocks like pandemics, extreme
weather events, cyberattacks and terrorism. It has to do so while
navigating an environment of exceedingly low interest rates while

preparing for anticipated litigation and the possibility of
unprecedented claims and losses.

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