ZURICH (Reuters) - The coronavirus pandemic will likely put a $12 trillion hole in global economic output by the end of next year, a burden far too high for insurers to cover, Swiss Re said on Wednesday.
“Overall the insurance industry has handled this well because it entered the crisis with lots of capital. So it knew about the risk,” Chief Executive Christian Mumenthaler told a Bloomberg financial conference.
Many market players hedged early, he said, figuring the COVID-19 respiratory disease would spread around the world after first being identified in Wuhan, China, late last year.
“And then the overall loss as we can see it now - between $50 billion and $80 billion - is manageable for the insurance industry. You compare that to more than $140 billion in 2017 in terms of nat cat (natural disaster) losses,” he said.
“What didn’t work well is the understanding of what is covered. Pandemic, and that’s known by the insurance industry, is not a risk you can cover. We think the output loss for the world over these two years will be $12 trillion. And the balance sheet of insurers are a tiny fraction of that. So a pandemic is a risk that cannot be diversified and therefore it cannot be insured.”
A Swiss Re spokesman said the $12 trillion estimate referred to the level of economic output after COVID-19 compared with where the global economy would have stood had it grown at the average rate before the pandemic hit.
Reporting by Oliver Hirt, Writing by Michael Shields; Editing by Louise Heavens
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