Botswana Insurance Company (BIC) Managing Director, Newton Jazire, says a proposition made by short-term industry players will put the country in a better position against similar pandemic like Covid-19 strikes in the future.
The industry, through Botswana Short Term Insurance Underwriters Association (BSTIUA) is currently preparing a proposal in order to address coverage gaps or protection gaps which have been exposed by the Covid-19 pandemic.
The protection gap is basically the difference between the total economic cost of a disaster less what is insured, and this difference is usually the responsibility of the affected businesses and individuals.
Our view is that for future pandemics and other insurable national disasters both government and private sector must continue to operate more collaboratively to proactively prepare and establish all core preventative and response measures and initiatives,” said Jazire.
In view of this, Jazire says the proposed ‘Botswana Catastrophe Re’ is the only solution.
Providing an example of how this will work, the BIC boss said, “This could take the formation and structure of a typical insurance pool with say, a total capacity for illustration purposes of P10 Billion. It would have a specified limit carried by the insurance private sector of say, P1 Billion and the Government comes in once this underlying limit is eroded for the P9 Billion.”
Jazire explained that this means that premiums for the P1 Billion coverage have to be paid by all private individuals and businesses that would like to access these covers in future.
“And to make this affordable because of the magnitude of the pandemics, the government too will then set aside premiums commensurate to the risks every year as part of the national disaster management program, which premium is then used to create this Catastrophe Re, or the pool,” he explained.
Jazire said with this proposed arrangement, when similar catastrophes or pandemics strike in future, they will find Botswana far more prepared to respond.
He said government too will not need to divert planned budget allocations for capital projects due to these unexpected ‘economic devastations’ since businesses will be covered as long as they have taken out insurance.
“In this way we believe, this plan would make much headway to narrowing the protection gap,” he noted