IAIS Cautions Against Requiring Insurers to Cover COVID-19 Losses
IAIS published a statement highlighting that it has been closely monitoring developments and actively coordinating with other standard-setting bodies and FSB to assess the impact of COVID-19 on the global insurance sector. IAIS cautions against initiatives seeking to require insurers to retroactively cover COVID-19-related losses that are specifically excluded in existing insurance contracts. Requiring insurers to cover such claims could create material solvency risks and significantly undermine the ability of insurers to pay other types of claims.
Since the costs of claims against losses have not been built into the premiums that policyholders have paid for their insurance, such initiatives could ultimately threaten policyholder protection and financial stability, further aggravating the financial and economic impact of COVID-19 outbreak. In circumstances where pandemic risks are covered by a policy, it is important that insurers pay out such claims in a prompt and efficient manner. Efficient claims handling and clear communication with policyholders regarding coverage for losses arising from COVID-19 should help deepen confidence and trust in the insurance sector and contribute to longer-term economic recovery efforts.
Additionally, IAIS emphasized that it is committed to support the FSB’s recently published principles for ensuring international cooperation and coordination of responses to COVID-19 outbreak. IAIS is facilitating the sharing of information and discussion among its broad membership on supervisory responses to the impact of COVID-19. IAIS welcomes the variety of proactive steps taken by insurance supervisors and insurers in support of policyholders. Such efforts include implementation of alternative, non-face-to-face distribution and servicing arrangements, enabling flexible arrangements for premium payments, premium rebates and discounts on policies with significantly lowered risk exposure and voluntarily enhancing cover/reducing premiums for essential workers.
Keywords: International, Insurance, COVID-19, Insurance Contracts, Financial Stability, Solvency Risk, IAIS
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