scorecardresearch
Follow Us:
Wednesday, August 05, 2020

Irdai planning pandemic risk pool, sets up panel

The regulator has set up a nine-member committee headed by IRDAI Executive Director Suresh Mathur to recommend the structure and operating model for the pool and submit its report within eight weeks.

Written by George Mathew , Sandeep Singh | Mumbai | Updated: July 10, 2020 7:54:29 am
A risk pool is a form of risk management practiced by insurance companies. (File)

The Insurance Regulatory and Development Authority of India (IRDAI) on Thursday said it’s considering a proposal to set up a “pandemic risk pool” in order address various risks which have been triggered by the Covid-19 pandemic and offer protection in case of a similar crisis in the future.

The regulator has set up a nine-member committee headed by IRDAI Executive Director Suresh Mathur to recommend the structure and operating model for the pool and submit its report within eight weeks.

The Indian Express reported on April 16 that a proposal had come up before the regulator and the industry to set up a pandemic insurance pool on the lines of terror insurance pool to tackle Covid-19 type of virus attacks that claimed thousands of lives and hit the economy and livelihood of millions of people.

A risk pool is a form of risk management practiced by insurance companies. Under this system, insurance companies come together to form a pool and contribute money which can provide protection to insurance companies against catastrophic risks such as floods or earthquakes or pandemic. Any claim will be taken care by the pool.

Irdai said there is a need to examine long-term solutions to address the various risks which have been triggered by the current pandemic and offer protection in case of a future similar crisis. Some of the risks like business interruption losses without concurrent material damage loss, loss of employment would result in huge losses much beyond the capacity of the government, insurers and reinsurers, it said. Therefore, there is a need to explore the possibility of addressing these risks and any other related risks arising out of a Pandemic through the mechanism of a ‘Pandemic Risk Pool”, Irdai said.

The Covid-19 pandemic which started as a public health crisis has led to significant disruption in economic activity mainly due to the measures taken to limit the spread of the disease.

“It has affected not just health but all sectors of the economy including but not limited to manufacturing, aviation, tourism, transportation, construction, services, agriculture and many others,” Irdai said.

The working group will study the need for setting up a “Pandemic Risk Pool”, giving rationale for the same.

A spate of virus attacks like SARS, Ebola, Avian flu and Coronavirus have claimed a huge human and economic toll across the world. “We had SARS in early 2000 and now we have Coronavirus. Are we sure that no new virus or other pandemic will happen in future. We have to prepare ourselves for any such issue in future,” said Tapan Singhel, Managing Director & CEO at Bajaj Allianz General Insurance Co.

Indian insurers set up a terrorism risk pool with an initial corpus of Rs 200 crore after the 9/11 attack on the World Trade Centre in New York. The terror pool surged after the Mumbai terror attack on

November 26, 2008, when claims worth Rs 600 crore were disbursed. The corpus was created by general insurance companies to ensure the bottom line of insurance companies did not take a hit when claims were made after a terror attack.

“The main issue is who will fund the pandemic pool. The government will have to agree and step in. The pool should have a corpus of Rs 8000-10000 crore. Corporates are likely to be the main clients of such a pool. In the ongoing lockdown, almost all business groups have suffered huge losses. These losses can be covered in the pandemic pool,” said an official.

In India, uninsured losses from all catastrophes and man-made disasters were 84 per cent of the total losses in recent times. Currently, the central government and the state governments are compensating for the huge losses in natural disasters to the extent they can, creating deep holes in the pockets of public finance.

📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines

For all the latest Business News, download Indian Express App.

Advertisement
Advertisement
Advertisement
Advertisement