DOI: 10.5255/ukda-sn-855319
title: Risk Sharing Mechanisms To Mitigate The Financial Consequences Of Pandemic Risk: Economic And Social Insurance Solutions For The UK, 2021

description: This was a fifteen-month research project (Jul 2019 – Oct 2021) funded by the Economic and Social Research Council (Risk sharing mechanisms to mitigate the financial consequences of pandemic risk: Economic and social insurance solutions for the UK (ES/V009389/1)) and carried out by researchers at City, University of London and Birkbeck, University of London. The pandemic has been causing critical business interruption (BI) across UK businesses, resulting in unprecedently widespread and global economic losses that are too large to be absorbed by the insurance industry. Many businesses had to stop trading for months due to nationally imposed lockdowns or had to deal with reduced revenues due to reduced demand or enforced reduced capacity. Yet, many businesses could not access BI insurance – either they had not already purchased it, or that BI insurance that they did purchase did not cover pandemic risk. They thus had no insurance payments to cover their losses from BI. Furthermore, given the systemic nature of the risk, even when all restrictions were removed by governments, the insurance industry was no longer offering BI insurance for pandemic, so that businesses could not buy it going forward to protect them from the losses of a future possible lockdown. As the government steps in to protect businesses, the burden for taxpayers is rising exponentially. There has been little, if any, understanding of how the economic burden that systemic risks such as pandemics cause to businesses can be shared through insurance-based mechanisms. This study sought to develop an understanding of the risk-sharing mechanisms that might enable the effective sharing of pandemic BI risk between UK businesses, insurers and the government. Through action research, we focused on enabling our partners to define the problem and act upon it. We partnered with UK businesses (Confederation of British Industry – CBI), the insurance industry (Association of British Insurers – ABI) and government stakeholders (Government Actuary's Department – GAD) in their efforts to develop a BI risk-sharing mechanism. Bringing in our knowledge and experience on risk-sharing mechanisms from around the globe for other catastrophic disasters, we worked with them in evaluating and developing BI interruption solutions to enable the continuation of UK businesses trading. We encouraged and supported a line of communication between the UK businesses, insurers and government for supporting UK businesses against interruption from current and future pandemics. Through this research, we sought to inform policy and practice in the emergent solutions of sharing BI risk in the UK. Having a closer and more granular look at how pandemic BI risk can be dealt with from a risk transfer point of view and with a clear focus on public-private partnerships, we developed a typology informed by the various proposals in the UK on possible solutions for BI insurance. Based on our action research, we developed this typology into a strategic response framework that evaluates four strategies for responding to pandemic risk for three audience groups: the insurance industry, government decision-makers and policymakers, and UK businesses. Data description (abstract) These data were generated as part of a fifteen-month ESRC-funded action research project aiming at enabling our key partners as they endavoured to generate solutions that can be applied to sharing business interruption (BI) risk from pandemic. The project involved: (1) attending meetings as participants where, as part of our action research objective we interacted closely with our partners, the UK businesses (Confederation of British Industry – CBI), the insurance industry (Association of British Insurers – ABI) and government stakeholders (Government Actuary's Department – GAD); and (2) collecting documentary data that we used to inform our understanding of the problem and the emerging solutions. The documentary data comprise (1) media articles around the problem of BI risk against the pandemic both in the UK and around the world, as well as the discussed and implemented solutions; (2) reports and announcements about the problem and the implemented solutions from the insurance industry, the UK businesses and the government; and (3) the evolving impact outcome of our action research that includes a media article, a report, and a practitioner paper that inform both industry and government action.