Munich Re Innovation Syndicate drops pandemic consortium plan
Munich Re Innovation Syndicate 1840 has dropped a plan to create a consortium for pandemic risk, Insurance Insider can reveal.
In July last year, this publication revealed that the syndicate-in-a-box (SIAB) was approaching potential Lloyd’s partners about involvement in the project.
The consortium would have offered parametric cover triggered by a demonstrable loss caused by a World Health Organization declaration of a public health emergency of international concern, and a civil authority lockdown affecting the location of the insured.
Now, however, it has emerged that Munich Re 1840 has abandoned the plan.
Sources said the provision or otherwise of specific Covid-19 cover proved a sticking point. Originally, the consortium planned to offer pandemic cover excluding Covid-19, owing to the live nature of the peril.
However, potential buyers indicated that they would not purchase cover without provision for Covid-19.
The Munich Re Innovation syndicate, which would have utilised the wider group’s vast body of pandemic data for the project, has now withdrawn. It is understood that no other syndicates are associated with the consortium at this time.
At group level, Munich Re has, since last autumn, repeatedly stressed its house view that pandemic risk cannot be borne entirely by the private sector, and that any protection from future pandemics must come from public-private partnership schemes.
In a September virtual press conference replacing the reinsurer’s usual Monte Carlo Rendez-Vous event, Munich Re CUO Stefan Golling outlined the failure of the carrier’s earlier attempts to introduce cover for epidemics.
Golling said Munich Re had in 2016 attempted to build an epidemic risk business providing BI cover to business clients, which would be organised into regional groups for diversification benefits, but explained take-up among corporate clients was very low.
“The solution for the systemic risk of pandemics can only be a combination of continuing with the private insurance market covering the currently-insured exposure, and to build government-backed solutions for the currently uninsured exposures,” Golling said.
He added that the insurance sector’s financial contribution to such a scheme would be “limited”. Instead, the sector would contribute by offering its expertise and its infrastructure, collecting premiums and paying claims on behalf of government-backed risk pools.
In 2020, Munich Re reported group Covid-19 losses of EUR3.4bn ($4.1bn), of which just over EUR3bn fell in the P&C business.
In the UK, work to establish a public-private partnership on pandemic risk dubbed “Pan Re” was paused in October as the government dealt with immediate problems triggered by Covid-19.
Munich Re declined to comment on the pandemic consortium specifically.
However, a spokesperson for the carrier said: “In order to make societies and economies more resilient against pandemic risk in the future, the strategy of Munich Re is to support the development of pooling solutions for the broad market, e.g. public-private partnerships.
“In addition, Munich Re wants to support and facilitate the further growth of a dedicated epidemic/pandemic insurance and capital market platform via its epidemic risk solutions offering.
“As this is a niche specialty market segment, the long-term potential of this initiative will hinge on the availability and growth of a diversified range of capacity providers.”