Best's Review


At Large
Setting the Right Tone

Insurers must clarify the role insurance can play in recovering from future pandemics.
  • Stephen Catlin
  • August 2020
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I am delighted to have worked in the insurance industry since 1973 and continue to believe that insurance provides tremendous value to society. However, I believe there are certain practices on which the industry could improve.

I have commented on many occasions that insurers and brokers should do a much better job when communicating with the public and with governments, especially regarding the true value that insurance provides. Secondly, it's in the nature of our business to focus on the past, and therefore we often neglect giving adequate thought about the future. Finally, I regret that—when an event occurs that causes extreme human suffering—the insurance industry often views the event primarily in terms of dollars and cents.

Over the years, we have identified a list of potential 'Big Ones,' events that could cause severe financial stress for insurers and reinsurers. These events range from a Category 5 hurricane that strikes at the heart of Miami to a powerful earthquake devastating Los Angeles or Tokyo. Over the past two decades, an extreme act of terrorism was added to the list.

However, until recently, relatively few insurers would have guessed that a pandemic could be the costliest event the industry would face. I believe that neither governments nor insurers had truly contemplated the economic consequences of a pandemic, in part because the financial impact of such an event is extremely difficult to model.

Unfortunately, the coronavirus has amplified some of the things that I believe the industry often does poorly.

It is not my place to comment on whether individual policies provide coverage for potential claims arising from COVID-19. However, I can say that I was dismayed at the defensive nature of some insurers' statements as the crisis began to expand. There always has been widespread public distrust—if not disdain—for the insurance industry, and the comments uttered by some insurers did not help our relationships with governments and our customers.

As I often have said, it's not what you say, but how you say it.

Now that it appears that COVID-19 may be the costliest event in the industry's history, we must begin to think ahead. Will society face pandemics of a similar magnitude in years to come? While I hope we will not, I suspect that we will. If so, what should be the role of the insurance industry? Should we simply adopt policy wordings that make it crystal clear that insurance coverage will be of little benefit to policyholders for future losses arising from a pandemic? Or, should we think about how insurers can play a meaningful role in economic recovery while still protecting the industry's capital base?

Projects are under way in several nations to clarify the role that insurance can play—in conjunction with government—if and when a similar crisis develops.

In the United Kingdom, I am chairman of the steering committee of a project dubbed 'Pandemic Re.' Our purpose is to strengthen the U.K.'s economic resilience by devising a mechanism to allow small and medium-sized enterprises (SMEs) to purchase insurance covering losses from future pandemics and, potentially, other catastrophic, difficult-to-insure risks.

To do this, we have formed six working groups—made up of a diverse group of leaders including insurers, reinsurers, brokers, policyholder representatives and a former Cabinet minister—which will explore the best ways to achieve our goal. We then want to share these suggestions with the government, working alongside officials to ensure that the interests of the public and private sectors are aligned.

The coronavirus has posed yet another substantial challenge to the insurance industry, and we must now speak with a helpful, considerate, thoughtful and structured voice. The work of industry projects, such as Pandemic Re, to respectfully offer potential solutions to governments will help the insurance industry to play a measured but meaningful role in the economic recoveries from future pandemics.

Best’s Review contributor Stephen Catlin is the founder of Convex Group and Catlin Group and former executive deputy chairman of XL Catlin. He is a member of the International Insurance Society’s Insurance Hall of Fame. He can be reached at

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