Reuters reported yesterday that Lloyd’s is collating details of insurers’ business interruption coverage for the Prudential Regulation Authority ("PRA") and is also in discussions about a government backstop to cover future pandemics, it said in a letter seen by Reuters.
It asked its members [Managing Agents} to provide data for the regulators by April 24, it said in a “Dear CEO” letter sent on Friday.
Lloyd’s also said it was talking to the UK finance ministry, regulators and business partners about a “Pandemic Re” government backstop and would publish preliminary estimates of the impact of COVID-19 on its members in early May.
Existing schemes such as Flood Re and Pool Re (terrorism cover) have proved successful in providing cover in the UK. As mentioned in The Telegraph recently, a "Pandemic Re" is now considered as necessary since the industry believes the availability for future BI cover against a pandemic would be very limited indeed.
A trade credit insurance backstop to be provided by the Government in order to support the insurance of trade between companies affected by COVID-19 is also under consideration between the ABI, the PRA and the FCA. This suggested backstop would supplement or replace the cover currently provided by private insurers which is expected to be scaled back as a result of the virus driving up the number of company insolvencies. Trade credit insurance is very important to the UK as this article by the ABI reports.
Additionally, in the US the idea is being floated of a US$500bn BI backstop specifically to cover pandemics which might be structured along the lines of the terrorism cover arranged after the World Trade Center event in 2001 called TRIA.