NEW DELHI: As businesses and the economy make strides towards recovery, the CII has suggested that India needs to expedite the process of setting up of a pandemic pool to sustain economic impact of Covid-like situations in future.
In a statement, the industry body suggested that the pool should be governed by availability of capital and modelled for greater capacity to ensure long-term viability of the risk management solution, which is critical for a high impact-low frequency risk like a pandemic.
The CII highlighted that as the risk associated with the pandemic are currently top-of-the-mind issue for most individuals and businesses, their participation, and contribution for premium funding can be appropriately solicited.
Another consideration is that global reinsurance capital is more likely to be available to the first few nations who start the pool as reinsurance commitment cannot be made to all nations due to the risk of aggregation in the pandemic risk, it said.
The CII has advised that even though initially fiscal support from Central government is required for the successful start of the pool, the government support can gradually reduce to near zero levels, as the pool becomes self-sufficient with accumulated surpluses over a period of 12-15 years.
It suggested the raising at least 5 per cent capacity, or pool limit, pandemic bonds, in the form of risk-linked securities, could be considered. Insurance companies can issue bonds through special purpose vehicles (SPVs) for investors and transfer a specified set of risks to the investor.
Its second suggestion is to have larger private partnership and to tap capital beyond insurance and reinsurance industry by including contribution or premium paid to the pool as eligible CSR expenditure.
Thirdly, waiver of GST for the premium collection for the pandemic pool, similar to other government-backed schemes like agriculture and government health schemes, would encourage enhanced contribution from individuals and businesses to be covered under the pool.
CII Director General Chandrajit Banerjee said: “The Government of India along with financial regulators including the Insurance Regulatory and Development Authority of India (IRDAI) have been working relentlessly on supporting the lives and livelihood by announcing various reform measures, products (like ‘corona kavach’) and packages during the pandemic.
“This is the opportune time for India to have the first movers advantage in creation of the pandemic pool with a 2-pronged strategy of going beyond the insurers and government by inviting international reinsurers to supplement capital contribution for the pool and to incentivise state governments to participate with additional supplementary capital for greater protection to their denizens.”