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.
In the spring of 2003, RMS pioneered quantitative event cancellation risk analysis with a study for FIFA in respect of the 2006 World Cup in Germany. As it happened, SARS was first reported outside China in February 2003, and was rampant throughout the duration of the risk analysis. At that time in London, as in Asia, sensible precautions such as avoiding busy Chinese restaurants was a rational defensive measure. Since the World Cup was scheduled for three years later – the summer of 2006, SARS was not considered as a cancellation risk. Terrorism was the primary risk to which investors in Golden Goal Finance Ltd were exposed.
Thanks to intensive global contact-tracing, and the need for an infected person to be symptomatic before being contagious, the World Health Organization was able to declare the SARS outbreak contained in July 2003. Nearly seventeen years after SARS, a novel coronavirus related to SARS appeared in China over a month ago in December 2019. Whereas SARS had a case fatality rate of about ten percent, the novel coronavirus (2019-nCoV) is more benign. The case fatality rate is currently estimated at just a couple percent. But even this level is highly disruptive, and all risk stakeholders will be anxious over the number of months before 2019-nCoV is contained.