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Non-Damage Business Interruption Insurance Policies During The Covid-19 Pandemic

Author

Listed:
  • Marina Brogi

    (Faculty of Economics, Sapienza University of Rome, Italy)

  • Valentina Lagasio

    (Faculty of Economics, Sapienza University of Rome, Italy)

  • Fabrizio Santoboni

    (Faculty of Economics, Sapienza University of Rome, Italy)

Abstract

Pandemic risks, such as Covid-19, are difficult to insure as they are characterized by multiple factor risks and losses and involve different types of businesses and people simultaneously. The scarcity of time series and statistical data prevents insurers from developing correct pricing. We propose a model of catastrophe risk with Non-Damage Business Interruption (NDBI) policies to manage the pandemic risk due to the spread of Covid-19. The model employs a Monte Carlo simulation of different lockdown scenarios: the frequency and severity distributions of losses of Italian SMEs. The main results show the importance of a Covid-19 lockdown exposure NDBI policy, which benefits not only SMEs but also the insurer.

Suggested Citation

  • Marina Brogi & Valentina Lagasio & Fabrizio Santoboni, 2022. "Non-Damage Business Interruption Insurance Policies During The Covid-19 Pandemic," Economic Review: Journal of Economics and Business, University of Tuzla, Faculty of Economics, vol. 20(1), pages 41-48, May.
    • Handle: RePEc:tuz:journl:v:20:y:2022:i:1:p:41-48
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    References listed on IDEAS

    as
    1. Silke Finken & Christian Laux, 2009. "Catastrophe Bonds and Reinsurance: The Competitive Effect of Information‐Insensitive Triggers," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(3), pages 579-605, September.
    2. Darius Lakdawalla & George Zanjani, 2012. "Catastrophe Bonds, Reinsurance, and the Optimal Collateralization of Risk Transfer," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 79(2), pages 449-476, June.
    3. Niehaus, Greg, 2002. "The allocation of catastrophe risk," Journal of Banking & Finance, Elsevier, vol. 26(2-3), pages 585-596, March.
    4. Robert W. Klein & Shaun Wang, 2009. "Catastrophe Risk Financing in the United States and the European Union: A Comparative Analysis of Alternative Regulatory Approaches," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(3), pages 607-637, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Covid-19; insurance policies; reinsurance; catastrophe risk;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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