Swiss Re is actively engaged in discussing possible joint public-private arrangements for covering business interruption risks, the group’s Chief Economist Jerome Haegeli says.

“The private sector cannot bear it alone,” he told an Australian briefing last week. “You need to have a pre-arranged solution with the Government and I wouldn’t be surprised that you are going to see more public-private structures for insurance of pandemic risks.”

Mr Haegeli says while it is possible to model pandemic risks, private insurance coverage is challenged by the sheer scale of the events and their correlations with financial markets.

Swiss Re Australia and New Zealand MD Mark Senkevics says pandemic exclusions in business interruption policies resulted from the SARS outbreak and the conclusion that a pandemic could bankrupt the entire industry.

“Pandemic models are being completely rewritten as we speak,” he told the briefing. “The last major data point that we had around pandemic was the 1918 flu. SARS and MERS were also pandemics but more limited in their impact.”

Swiss Re expects the COVID-triggered global recession will be almost twice as sharp and deep as the global financial crisis experience. A rebound will be followed by a protracted recovery and adjustments to long-term repercussions.

Dr Haegeli says recently identified megatrends will be accelerated, major paradigm shifts are in the making and the longer-term economic and political implications should not be underestimated.

Globalisation has likely peaked, with implications for international supply chains, while the coronavirus will lead to digitalisation impacts for insurance products and claims handling, he says.