The Economic Consequences of COVID-19
Research looks at solutions to addressing global financial losses arising from the current pandemic.
The coronavirus outbreak has caused unprecedented business interruption (BI) across UK businesses and it’s clear that the insurance industry cannot withstand, alone, the increasing levels of economic losses. Yet, businesses rely on adequate BI insurance in order to operate. As the government steps in to protect and support businesses, the burden continues to fall on taxpayers to cover the cost. It is also clear that collaborative efforts between the various sectors will be imperative as the UK moves through the phase of economic recovery.
What we’re researching
Dr Konstantinos Chalkias (Department of Management), Birkbeck, University of London and a team are researching the risk-sharing mechanisms which will effectively share the pandemic BI risk between UK businesses, insurers and governments. They will evaluate and build upon short-term post-lockdown products being generated by insurers, and develop new solutions with this full range of stakeholders. This will enable delivery of a sustainable longer-term governance and funding solution for supporting UK business against interruption from the current and future pandemics.
“While government action is vital, taxpayers are exposed to an ever-increasing financial burden. Our study will identify risk-sharing solutions to effectively share the risk between UK government, insurers and businesses. Collaboration is crucial as the pandemic risk is rather large-scale and concurrent in nature to be adequately covered by one of these stakeholders alone.”
What will the impact be?
Building from their own extensive knowledge of existing risk-sharing mechanisms and using the expertise and capabilities of their stakeholders, the research team aims to generate solutions that can be applied to sharing BI risk from the pandemic, and enable each stakeholder to take part in paying for the costs of such risk. The research will also contribute to public policy, providing both conceptual frameworks and policy implications that are of interest to public policy scholars.
The research will also contribute to academics working in a number of disciplinary areas through the frameworks, methodology and educational materials provided. The study will be relevant to academics in: 1) disaster risk management; 2) insurance and reinsurance risk; 3) social construction of risk and management of risk between different organizations; 4) research methodology considering how to develop action research approaches to address large-scale and complex phenomena, such as market functions when multiple market and non-market stakeholders are involved in the solution.
The project team will release interim outcomes and make its final recommendations in August 2021.
Dr Konstantinos Chalkias said, "During these unprecedented times, the government stepped in to provide emergency support for workers and businesses. This is a clear example of government acting as an ‘insurer of last resort’, by paying for costs that cannot be covered by the private sector alone.
While government action is vital, taxpayers are exposed to an ever-increasing financial burden. Our study will identify risk-sharing solutions to effectively share the risk between UK government, insurers and businesses. Collaboration is crucial as the pandemic risk is rather large-scale and concurrent in nature to be adequately covered by one of these stakeholders alone."
Dr Geoff Walters, Executive Dean of Birkbeck’s School of Business, Economics and Informatics, said: “It is encouraging to see that this vital work has been recognised by the ESRC. Collaboration between universities and the private sector will be key to resolving economic challenges in light of COVID-19 and I am delighted that Dr Chalkias will be among those offering solutions to problems we may encounter through the UK’s economic recovery.”
Project Fact File
Full project title: “Risk Sharing Mechanisms to Mitigate the Financial Consequences of Pandemic Risk: Economic And Social Insurance Solutions for the UK”
Funder: Economic and Social Research Council (ESRC)
Length of award: June 2020-August 2021
People- Principal Investigator: Professor Paula Jarzabkowski (Department of Management), City, University of London; Co-Investigators: Dr Eugenia Cacciatori, (Department of Management), City, University of London; Dr Konstantinos Chalkias (Department of Management), Birkbeck, University of London.