After any major event in the history of the world, countries make significant transitions and changes. When a widespread, unfamiliar, or not fully understood event occurs the social and economic sectors need to take certain measures faster than usual. For example, one of the exclusions in current contracts of insurance in Mongolia - “No reimbursement for any losses or damage arising from terrorism” clause, was the result of the September 11, 2001, terrorist attack to the World Trade Center. Following the massive damage, the London insurance market reacted immediately, eliminating the terrorism coverage from all non-life insurance contracts in the UK and started providing such protection only to interested parties in a controlled and calculated manner.

There are many exclusions made in insurance contracts to limit the indemnity of the insurance industry after similar or significant losses, such as:

• Avian flu exclusion (Exclusion due to the 2003 SARS outbreak)
• Date recognition exclusion clause (Exclusion due to computer system date recognition errors during the 1999-2000)

The response to managing risks that have caused significant social or economic damage or scandal is, in essence, the main purpose of maintaining the balance of the system, and the measures taken can be divided into two main categories: "Progress" or "Protection". Risk management through progress and innovation involves a kind of transition that is favorable to individuals and businesses (seeking new forms of financing, enabling registration and calculations using technology), while an unpleasant transition is made through protection or prohibition (certain types of insurance protection for individuals and businesses will be no longer available) as shown in 3 examples above. Risk management through innovation, for example, with the help of ILS or Insurance Linked Securities, has a history of transferring risk to the capital markets.

From the view of risk management, although recognizing risks in any sector, underestimating the extent and impact of them can lead to an imbalance in the sector (and other related sectors) and a setback for development over many years.

The risk of the COVID19 pandemic is as follows.

• Immediate impact (Especially in our country, the implementation of quarantine measures of unknown frequency with prior notice)
• Direct impact (Businesses and personal income loss and decrease)
• Flat impact (affecting all social and economic sectors)
• Global impact (Where there is one country with transmission, it means global risk still exists)

Although severe, the risk of the COVID19 pandemic is "testing" all sectors of the world and poses a risk to the underwriting and operations of the insurance industry. In the case of underwriting, the insurance products that are most exposed to this risk are:

• Business interruption
Business interruption insurance is usually insurance that allows you to claim compensation in the event of a business interruption due to damage only to the insured property. Internationally, however, there are companies that have expanded this insurance to cover non-material damage in addition to material damage, such as infectious diseases, and these companies are receiving a large number of claims for business interruption insurance during COVID19. The UK Supreme Court has reviewed approximately 700 business interruption contracts and found that 12 of the 21 types of business interruption protection have the potential to compensate and 9 are non-reimbursable.

• Event cancellation insurance
The Tokyo Olympics, the world's largest event in 2020, has been postponed due to the pandemic, prompting insurance companies to pay about $ 3 billion in claims. Swiss Re reinsurance company alone is facing $ 250 million in damages due to the postponement of the Olympics, while Munich Re reinsurance company, which has suffered $ 4.9 billion in losses due to the COVID19 pandemic, has suspended cancellation insurance.

• Trade credit insurance
This type of insurance, which protects against defaults on products sold on credit, is considered to be a product that is more likely to receive claims in the event of a pandemic, when businesses cease operations and incomes are disrupted, and unemployment rises.

• Employer's liability insurance
Cases of poor hygiene in the workplace (infection in the workplace), domestic accidents caused by employees working from home, and injuries due to improper handling of equipment increase the risk of making claims with this type of insurance. However, the reduction in the number of employees in the workplace due to international sanctions is one of the factors reducing the number of claims from risky workplaces.

• Directors and officers liability insurance
During the pandemic, executives around the world are faced with unprecedented challenges and the need to make quick decisions on a variety of issues. Claims from the company's shareholders, decisions that do not take into account the health and safety of employees, and mismanagement of the company in connection with COVID19 are the main sources of claims.

• Health insurance
Health insurance is the most affected by COVID19 and varies from country to country due to differences in the health insurance system and the cost of services. For example, in the United States, where the cost of health care is highest, the cost of treating one patient is $ 78,000 depending on age, and the cost of treating an uninsured person under the age of 20 is $ 68,000. The United States is a country with a highly developed private health insurance system. In Mongolia, the maximum cost per person is MNT 8.9 million, which is covered by the health insurance fund. Private health insurance is not yet widely available in Mongolia, and if one in two people becomes infected, there will be a claim to pay for $ 5 billion in medical expenses. Internationally, there are a number of uncertainties, such as the uncertainty of long-term effects of the COVID19 virus on the human body, the risk of new virus outbreaks and whether there will be a change in cost due to the new treatment, which makes this type of insurance pricing difficult in terms of actuarial calculations.

In conclusion, the risk of a pandemic facing governments and businesses around the world at the same time is a clear demonstration of many shortcomings that we have not been able to see. Firstly, it would be a wise strategy for us to use this issue as a catalyst for progress, and we need to decide what protection measures need to be taken to maintain the balance of the system if necessary.