IAIS Report Examines Supervisors' Role in Pandemic Risk Insurance

The International Association of Insurance Supervisors (IAIS) and the Access to Insurance Initiative (A2ii) have published a note examining the role insurance supervisors could play in the design, development, and implementation of insurance-based programs for pandemic risk.

The report, The Role of Insurance Supervisors in Multi-Stakeholder Approaches To Address Pandemic Protection Gaps, is part of a broader effort to learn from the experiences of the COVID-19 pandemic.

The IAIS/A2ii note considers key characteristics of proposals—including public-private partnerships and risk pools—and outlines the roles that insurance supervisors can play as future initiatives are developed.

The IAIS said the note is based on insights gained through interviews with senior officials from supervisory authorities and international organizations, from IAIS and A2ii stakeholder events held during the second half of 2021, and a review of existing literature on pandemic protection gaps and the insurability of pandemics.

While acknowledging pandemic protection gaps in areas like health and mortality, the report focuses on coverage gaps in areas where risk diversification is difficult to achieve, in particular coverage for nondamage business interruption as a result of pandemics.

Several key takeaways as expressed in the report including the following.

• Supervisors can play an important role in helping ensure that a balance of policyholder protection and market development considerations are built into the design and implementation of future multistakeholder insurance-based programs addressing pandemic risk. Ideally, supervisors would be involved in the development of such programs from the beginning to ensure the design incorporates the insight and expertise that supervisors can provide.
• There will be no "one-size-fits-all" approach to addressing pandemic risk protection gaps, and any approach will be shaped by the environment in the given jurisdiction.
• A key role for supervisors includes providing technical and other advice to the government on prudential risks associated with insurance-based programs developed to address pandemic risk and the regulatory frameworks under which such programs could operate.
• There could be a place for supervisory initiatives aimed at building prevention measures into pandemic risk coverage to enhance resilience against future pandemics. Such initiatives could potentially draw on lessons learned from risk reduction or prevention efforts implemented to address other risks, such as natural catastrophe risks.

The IAIS/A2ii note also suggests that approaches it outlines to address pandemic risk might also be applicable to other systemic risks, such as cyber risk.

The IAIS will now draw on concepts presented in the note to inform its future work on pandemic protection gaps, as well as on how insurance supervisors can address protection gaps more broadly.