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How to Reconcile Pandemic Business Interruption Risk With Insurance Coverage

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  • Sandrine Spaeter

Abstract

In the face of major risks, the financial capacities of private (re)insurers are rapidly reached. For major risks such as natural catastrophes, a risk transfer can be operated to the financial markets through securitization. A pandemic is a cat. Unfortunately a nat cat securitization strategy cannot be replicated for a pandemic cat. In this paper, we consider the economic losses that firms are bearing during a pandemic like the COVID-19. We focus on their most important issues: Risk correlation, impact of administrative decisions, moral hazard, and financial liquidity. Then we propose a coverage strategy of the pandemic business interruption risk that combines self-insurance, standard ? capped ? (re)insurance and new double triggered pandemic business interruption bonds. Lastly, we provide a simple illustration with French data related to the losses borne by the catering sector.

Suggested Citation

  • Sandrine Spaeter, 2023. "How to Reconcile Pandemic Business Interruption Risk With Insurance Coverage," Revue d'économie politique, Dalloz, vol. 133(2), pages 177-201.
    • Handle: RePEc:cai:repdal:redp_332_0177
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    Cited by:

    1. André Schmitt & Sandrine Spaeter, 2023. "Providing pandemic business interruption coverage with double trigger cat bonds," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(3), pages 687-713, July.

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