Recognizing the devastating impact caused by the COVID-19 pandemic on the economy, businesses, and their employees, Marsh & McLennan Companies (MMC) has called for the development of a combined public-private pandemic risk solution.
The company wrote to the federal, provincial, and territorial Ministers of Finance of Canada, informing them that MMC is willing to offer its assistance in the creation of a risk financing and risk transfer mechanism “delivered by industry and back-stopped by federal and provincial governments.”
MMC outlined in its letter to the ministers that the basic framework of a pandemic risk insurance program would be a risk-sharing model between policyholders, insurers, and government. In this model, policyholders would absorb initial losses up to specified deductibles, while insurers would provide business interruption coverage up to a limit. The federal and provincial governments would backstop the overall program by bearing a part of the damages above a certain level. MMC added that this program is not unlike the provision of subsidized agricultural production insurance.
According to MMC, a public-private pandemic risk solution will serve two national interests: it would help accelerate Canada’s economic recovery over the summer and fall of this year; and the solution would provide economic protection against another pandemic in the future.
MMC also warned in the letter that there is currently “very limited insurance protection” to cover for damages related to COVID-19. The firm said that in the coming months, it anticipates demand from Canadian businesses for pandemic risk insurance will skyrocket. If the government fails to intervene, MMC believes that the global insurance market will respond in one of three ways, none of which are ideal:
