The CEO of Lloyd’s of London, John Neal, and Lloyd’s chair of Lloyd’s, Bruce Carnegie-Brown, have met with UK Chancellor Jeremy Hunt and proposed an innovative solution to assist the National Health Service (NHS) during times of unforeseen expenditure caused by events such as pandemics.
Lloyd’s, which is the largest insurance market globally and encompasses 76 companies, suggested creating personalized insurance contracts for the struggling NHS, as well as government protection for flood and drought emergencies arising from the climate crisis.
Speaking about the talks, Bruce Carnegie-Brown, chair of Lloyd’s of London, said that if the insurance market could provide a solution that supports the NHS in case it goes over its budget or capacity due to external events, such as a pandemic, then it would demonstrate a positive response from the insurance sector.
New Lloyds proposal could save UK tax payer from funding unforeseen events
This proposal, a world first for the UK, could save taxpayers from facing unforeseen expenses. However, possible concerns about the potential privatisation of the NHS could cause difficulties in striking a deal, particularly when there is an ongoing dispute between the government and medical staff over pay.
Although the government has been reluctant to collaborate with the private sector due to mutual mistrust in the past, Carnegie-Brown pointed out that there are some public-private partnerships in place, such as for terrorism claims for large buildings in the UK.
Lloyds could assist the NHS with periods of peak demand
The exact nature of the insurance coverage is yet to be defined, but Lloyd’s could consider offering products like insurance-linked securities, which can allow insurers to share some of the risk with external investors.
According to the British Medical Association, the government had to spend US$120.4 billion to fund the NHS Covid-19 response up to September 2021, in addition to its regular NHS budget. Moreover, it has pledged an additional $115 billion for Covid-19 funding between 2022 and 2025, including for vaccines and antiviral treatments.
Carnegie-Brown, said; “One of the challenges the government has is around peak demand in the NHS relative to NHS budgets,”
He continued: “If we can provide an insurance solution that effectively funded the NHS if it breaches its capacity, or budget issues, then it would show the insurance industry responding in a positive way to something that was caused by an exogenous event,” he said. “Obviously things like a pandemic might cause very dramatic increases in demand on the NHS and its resources.”
He said the structure was yet to be decided upon and those parameters would determine the extent of the risks and how affordable the insurance would be.
“It’s about understanding what the government’s risk parameters are around these kinds of issues, and historically the government has borne 100% of the risks. What we’re saying is that the private sector could take a share of this risk, but we would need to explore the precise terms on which we did that.”
He said the government had been open to the insurance market’s proposal, adding; “We’re glad that they are listening and open to exploring the opportunity.”
