The COVID-19 pandemic has caused significant disruptions to businesses and resulted in significant revenue losses, particularly for those impacted by workplace closures. In response, governments around the world have implemented extensive monetary and fiscal support measures to address liquidity risks and prevent mass insolvencies. However, many businesses did not have applicable insurance coverage for these types of losses, highlighting the challenges to the availability of insurance coverage for pandemic-related business interruption risks.
This paper examines the responses of both the fiscal and insurance sectors to the economic disruptions caused by COVID-19 workplace closures. It analyzes the challenges associated with the availability of insurance coverage for pandemic-related business interruption losses and the risks and challenges related to large-scale fiscal support for businesses.
Furthermore, the paper proposes a loss-sharing arrangement between governments and insurance markets as a potential solution to enhance the contribution of insurance markets to providing financial protection in the context of future pandemics. This arrangement would allow insurance markets to share the risk with governments and provide businesses with adequate coverage for pandemic-related business interruption losses.
In summary, this paper highlights the need for better insurance coverage for pandemic-related risks and the potential benefits of a loss-sharing arrangement between governments and insurance markets in providing financial protection for businesses impacted by future pandemics.