Robert Muir-Wood, Chief Risk Officer, RMS
Tim Edwards, Regional Director – Head of Catastrophe Analytics Globals, Willis Re
This article was originally published in Insurance Day
The economic impact of COVID-19 (coronavirus) is clearly going to be significant, with global growth in gross domestic product (GDP) for 2020 now expected to be only half that of the three percent originally anticipated, at best. Relative to the US$86.5 trillion global GDP for 2019, that equates to around US$1.3 trillion dollars of lost economic activity. This is twenty-five times the economic loss estimated from the SARS outbreak in 2002-3.
The losses from COVID-19 will emerge from many facets
of the economy.
Perhaps the most difficult and unfamiliar feature of the coronavirus pandemic is how the associated risk is rising rapidly through time. We are all used to managing our response to risks that are relatively stable, such as street crime or dangerous driving. The risk from the COVID-19 is different.
It is going to be with us for a while, and in many countries its rise looks exponential. This steep, geometric progression is completely new to most of us. However, those who have lived through hyperinflation in Zimbabwe or Venezuela know what rapid and out-of-control feels like. In several countries, rates of incidence and of mortality have been doubling every three days: imagine fighting an army that on day three has doubled in size and after a fortnight is thirty-two times bigger than on day one.
So how do we manage our own personal risks through this extraordinary period, and how should companies help make risk-based decisions on behalf of their employees?
Dr. Tedros Adhonom Ghebreyesus, director-general of the World Health Organization (WHO), has insisted that containment of COVID-19 is feasible, and must remain the top priority for all countries, but that there is not a one-size-fits-all approach. This was reiterated by Dr. Gaudenz Silberschmidt, director, health and multilateral partnerships – external relations at the WHO, who gave a keynote talk at the ReFocus 2020 conference in Las Vegas on March 3. This is the leading annual meeting for senior figures in the life insurance industry.
After his keynote, as an expert on pandemic risk modeling, I participated in a panel together with Dr. Silberschmidt and others, on the benefits of prevention. All the panelists, including myself, expressed support for this focus on containment, and the overall approach the WHO is taking in dealing with the COVID-19 outbreak, especially in Iran where the WHO has sent an urgent mission.
Imagine being seated for eleven hours on a plane next to a passenger wearing an anti-viral face mask, and with a hand sanitizer clipped to his back-pack, which he dipped into for cough relief lozenges. This was my stressful experience last week; and it could be a common anxiety in the months ahead. IATA has estimated a revenue loss of about USD $30 billion this year, most of which would be in the Asia-Pacific region. But this was assuming that Covid-19 would play out like SARS in 2003, which caused a sharp decline for six months, followed by a quick rebound. Many business sectors other than aviation are likewise hoping for recovery after the summer. The fate of the Tokyo Olympics depends on recovery by July.
SARS was a very severe disease. Most patients developed pneumonia, and about 10% died. According to China CDC, about 5% of Covid-19 patients have critical diseases including respiratory failure, septic shock and multiorgan failure. In about 14% of cases, the virus causes severe diseases including pneumonia and shortness of breath. But about 80% of patients have a mild form of disease. Reassuring as this may sound, the mildness of most cases makes Covid-19 a far greater global menace than SARS. Those infected with SARS were not infectious during the incubation period. This greatly facilitated the task of tracking infected contacts of SARS cases; surveillance could focus on those contacts who developed symptoms.