The Association of British Insurers (ABI) has suggested reinsurance pools like those used for terrorism and earthquake risks could be part of solutions for protecting against future pandemic risks.

ABI Director General Huw Evans says it will be necessary for governments and insurers to work together in future to find new solutions, given the risks exposed by the current coronavirus outbreak.

“If global pandemics are to be a more regular part of our world, we need to start talking about how to protect more businesses and individuals than has been the case with COVID-19,” he says.

The ABI notes that protection-gap schemes already in existence include New Zealand’s Earthquake Commission, the California Earthquake Authority and the UK’s Flood Re and Pool Re.

The schemes have different levels of state involvement, but all seek to enable insurance protection for risks that would otherwise be uninsurable, Mr Evans says.

The coronavirus pandemic has highlighted a lack of widespread cover under business interruption policies, designed to respond to more usual risks such as damage to premises and supplier failure.

Mr Evans says the size and scale of government support packages and central bank interventions show why insurers have long been wary of the huge potential costs of protecting against pandemics.

“Even in the UK, providing widespread insurance cover against pandemics would be virtually impossible without state support because the amount of capital insurers would have to hold against the risk would result in completely unaffordable prices for customers,” he says.

Despite policy limitations, UK insurers expect COVID-19 to be a major event with £275 million ($559 million) of travel insurance claims, and claims for cancelled events, school trips and some elements of business disruption.