FERMA calls on the EC to address the business interruption insurance without physical damage issue by designing a PPP solution

28 May 2020 — Daniela GHETU
The Federation of European Risk Management (FERMA) called on the European Commission to create an EU resilience framework for catastrophic risks to address the severe shortage of business interruption insurance without physical damage (NDBI) that arises in several catastrophic events, such as pandemic and massive cyber-attacks.

The letter to the European Commission is the result of urgent work by a FERMA taskforce, composed of experienced risk managers from FERMA national members. It sets out FERMA's vision for a multi-layered and graduated public-private partnership in a position paper.

There is currently little to no insurance coverage available for financial losses from NDBI in case of catastrophic risks, such as the current COVID19 pandemic. The resilience framework would have the flexibility to respond to a range of catastrophic events, such as pandemic and massive cyber-attacks, that can create severe business losses without physical damage.

FERMA President Dirk Wegener said:

"We now aim to deepen discussions with the EU, the Member States and the insurance sector, and to develop solutions for both short-term crisis management and long-term business resilience. FERMA members have expertise and experience in the field of business interruption that we want to contribute to the future resilience of European business."


The resilience framework proposed by FERMA would function on four levels:
  • Enterprise-level risk management: anticipation, prevention, identification and mitigation of risks
  • Transfer of risk to private insurance and reinsurance markets, developing enhanced coverage for NDBI
  • National Member state pool guarantees
  • European Union support for, and coordination between national governments

Wegener stated:

"This holistic approach supported by the insurance sector, national governments and EU institutions would ensure that the resilience framework has the capacity to benefit all businesses, from small and medium-sized enterprises facing immediate liquidity issues, to the largest transnational corporations concerned with supply chain and trade disruptions."


(Re)insurance participation is important, according to FERMA. Insurance can apply clear parameters to give risk-based assessments for contributions from enterprises to the framework funding mechanism. In turn, this would give businesses an incentive to apply risk management methodologies, such as Enterprise Risk Management, because they would be assessed on their risk management maturity.

Wegener concludes:

"A resilience framework will support the development of NDBI coverage to give European enterprises the financial security to maintain flexibility in the face of catastrophic events and incentives to apply risk management methodologies."



Note: NDBI is a situation in which a business is unable to operate normally, despite suffering no physical damage, due to circumstances beyond its control (force majeure). For example, a factory might be compelled to cease operations because temporary national measures prohibit employees from going to work. Although there is no physical reason for the factory to close, it still suffers business interruption and financial loss. Apart from national pools, there is currently very limited insurance coverage available in Europe for NDBI.

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