Insurers can’t cover the cost of the pandemic shutdown — and shouldn’t be asked to
“Half the global economy just shut down overnight,” says Ray Lehmann, director of finance, insurance and trade for R Street, a Washington-based think tank. “The insurance industry obviously doesn’t have the capital to support half the economy.” He estimates that all commercial property insurance written for North America is backed by perhaps $600 billion in assets. That sum, though significant, is dwarfed by the staggering cost of the ongoing shutdowns.
The size of the problems means such insurance would be a hard sell, even to customers. If there is a high risk of a global crisis, the price of insurance against it will be close to the cost of expected claims. And if it’s low-risk, people think, why bother buying insurance for something that hasn’t happened in decades? Lehmann notes that one U.S. insurance broker, Marsh, was offering pandemic policies before the coronavirus crisis hit; no policies were sold.
Only one entity can provide insurance against these sorts of events: a stable national government that can cover today’s losses by borrowing against tomorrow’s income. Moreover, that’s exactly who should be paying the costs of a pandemic.
“Half the global economy just shut down overnight,” says Ray Lehmann, director of finance, insurance and trade for R Street, a Washington-based think tank. “The insurance industry obviously doesn’t have the capital to support half the economy.” He estimates that all commercial property insurance written for North America is backed by perhaps $600 billion in assets. That sum, though significant, is dwarfed by the staggering cost of the ongoing shutdowns.
The size of the problems means such insurance would be a hard sell, even to customers. If there is a high risk of a global crisis, the price of insurance against it will be close to the cost of expected claims. And if it’s low-risk, people think, why bother buying insurance for something that hasn’t happened in decades? Lehmann notes that one U.S. insurance broker, Marsh, was offering pandemic policies before the coronavirus crisis hit; no policies were sold.
Only one entity can provide insurance against these sorts of events: a stable national government that can cover today’s losses by borrowing against tomorrow’s income. Moreover, that’s exactly who should be paying the costs of a pandemic.
“Half the global economy just shut down overnight,” says Ray Lehmann, director of finance, insurance and trade for R Street, a Washington-based think tank. “The insurance industry obviously doesn’t have the capital to support half the economy.” He estimates that all commercial property insurance written for North America is backed by perhaps $600 billion in assets. That sum, though significant, is dwarfed by the staggering cost of the ongoing shutdowns.
The size of the problems means such insurance would be a hard sell, even to customers. If there is a high risk of a global crisis, the price of insurance against it will be close to the cost of expected claims. And if it’s low-risk, people think, why bother buying insurance for something that hasn’t happened in decades? Lehmann notes that one U.S. insurance broker, Marsh, was offering pandemic policies before the coronavirus crisis hit; no policies were sold.
Only one entity can provide insurance against these sorts of events: a stable national government that can cover today’s losses by borrowing against tomorrow’s income. Moreover, that’s exactly who should be paying the costs of a pandemic.
