Page 21 - The Insurance Times July 2020

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COVID-19 insurance gap However, there will be significant chal- Belgian insurance industry
lenges in delivering such a solution.
creates opportunity for to see GWP declines across
When businesses were forced to close
parametric model their doors across the UK to reduce the the board in 2020
COVID-19 has highlighted that the spread of the virus, insurers received The economic uncertainty and high risk
majority of businesses had no insur- an influx of claims on business interrup- of unemployment is expected to ad-
ance protection against pandemics, tion policies. In order to pay these versely impact the premium earnings
even if they held a business interrup- claims, insurers would need to hold of Belgian insurers, according to
tion policy, which has created an op- large amounts of liquid assets. The GlobalData, a leading data and
portunity in the market, according to Association of British Insurers expects analytics company.
GlobalData, a leading data and its members to pay out £900m in busi- GlobalData forecasts both the life and
analytics company. One startup, Ma- ness interruption-related claims as a the general insurance markets to de-
chine Cover, is looking to capitalize by result of the COVID-19 pandemic. cline in Gross written premium (GWP)
offering parametric insurance to pro-
Yasha Kuruvilla, Insurance Analyst at in 2020. The life market is now ex-
vide protection to businesses in future
GlobalData, comments: “Given that pected to decline by 1.7%, while it was
periods of major economic downturn.
only a minority of companies have previously forecasted to grow by 2.0%.
GlobalData’s 2019 UK SME Insurance cover against pandemics, the cost to Similarly, GlobalData expects the gen-
Survey found that 17.3% of UK small insurers if the majority of businesses eral insurance market to decline by
and medium-sized enterprises (SMEs) were covered would be exorbitant. 1.6%, compared to growth of 1.5%
held business interruption policies last This limits the efficacy of the traditional before the pandemic.
year. However, the majority of these insurance model when dealing with GlobalData insurance analyst, Deblina
policies do not provide cover for pandemics. Parametric insurance could Mitra, commented: “GlobalData’s job
pandemics, which has led to tension be a good starting point in navigating analytics database shows there has
between businesses and the insurance some of the insurance issues that have been a 1% decline in the number of
industry. Parametric insurance can become apparent. Since payouts are active jobs in the insurance industry in
help form part of the solution to pre- based on a clear, measurable statistic the last 30 days. This is based on the
vent this from happening again in the that is agreed upon by both parties, jobs’ data tracked across 11 insurance
future. there is no grey area regarding entities in the country.”
Parametric insurance operates on the whether a claim should be paid or not.
The virus outbreak is expected to lead
premise that once a certain event is “While it is unlikely that one insurtech will to partial deterioration of the insurers’
triggered, a payout is automatically be able to hold the required capital to capital strength, as decline in cash flow
issued to the policyholder. According to successfully protect businesses against due to economic uncertainty and low
Machine Cover, its policy will automati- future pandemics, using the model of premium earnings from new policies
cally pay out once there is a very sig- parametric insurance to do so is certainly will impact insurers’ profitability. Fur-
nificant decline in economic activity. worth considering moving forward.” thermore, higher claims demand from

The Insurance Times, July 2020 21