Time to modernise pandemic resilience

May 8 2020 by Nick Ferguson

Covid-19 litigation and finger-pointing will doubtless continue for years, but in the meantime the world needs a better plan for how to deal with the next pandemic.

Some industry leaders have called for government-supported risk-pooling, including Axa’s group chief executive Thomas Buberl, who said in an interview with French media last weekend that he was pushing for a European scheme. But he also noted that more would need to be done to prevent outbreaks from snowballing into pandemics in the first place.

“One of the lessons of this pandemic is that the world was not sufficiently prepared and did not coordinate enough,” he told Le Journal du Dimanche.

“The concept of closing down the economy to increase social distancing is an instrument as blunt as it is ancient. There must be architectural and technology solutions for raising resilience.” Robert Muir-Wood, RMS

Prevention is crucially important because pandemic risk, by definition, cannot be diversified — it is a global phenomenon that leaves no uncorrelated assets for insurers to invest reserves in.

But the tools we are using to manage the Covid-19 pandemic are not fit for the 21st century. Quarantines are medieval in origin — the term itself stems from the Italian for 40, which was the number of days that ships arriving in Venice from ports infected with bubonic plague had to sit at anchor before landing. Social distancing is first recorded in 17th-century Florence. At the same time, confinement of the sick was practised in London to contain the plague.

Speaking from lockdown in the UK, RMS’s Robert Muir-Wood delivered a virtual keynote speech on Wednesday (May 6) to an audience of remote delegates attending the RMS Exceedance conference in which he called for a much more modern approach.

“The concept of closing down the economy to increase social distancing is an instrument as blunt as it is ancient,” he said. “There must be architectural and technology solutions for raising resilience.”

As examples, he suggested that hotels could be designed to temporarily transform into hospitals when needed, factories and industrial plants designed so that workers can keep their distance, and cities could adopt plans that allow for social distancing while sustaining most economic activity.

Insurance has a role in this vision of future pandemic risk management, possibly in the form of pandemic business continuity insurance based on parametric triggers. But resilience measures are key.

Huddle
Technology has a key role to play in restarting the global economy. Quarantine and containment will continue to be necessary, but sophisticated contact tracing and measurement of real-time transmission rates are essential to get affected countries back to normal.

The School of Public Health at the University of Hong Kong has been publishing a real-time transmission estimate since February and other countries will need to adopt similar techniques as they manage the normalisation process.

“In retrospect it was not smart PR for insurers to provide a product called business interruption [BI], but with a clause in the small print explaining why it would not pay out in a pandemic.” Robert Muir-Wood, RMS

It’s not enough to blindly open sectors of the economy. Governments will need to model the effects of such relaxations and closely monitor the results through digital surveillance.

“It would help to have a standardised metric in terms of hours of social contact per day and per person,” said Muir-Wood. “I propose we call this new metric Huddle. We should measure Huddle by business, sector, entertainment, sports occasion, as well as by age band and region.”

Few doubt that digital tools can help to reduce transmission rates, but ensuring uptake and managing privacy concerns are the real challenge.

Lines of defence
One of the starkest lessons of the Covid-19 pandemic catastrophe, as Muir-Wood calls it, has been the failure of the WHO to force China into taking more decisive action.

After the Sars outbreak in 2003, when China suppressed information for months, the organisation was given new powers to take the lead in responding to public health emergencies of international concern, which should have empowered it to be more forceful in the way it handled the onset of the outbreak in China. Instead, it was too passive.

“President Trump has a point,” he said. “Up against nation states the WHO has no power.”

Muir-Wood estimates that from the first identified case of Covid-19 in Wuhan in the second week of December, there was a period of 40 days when the virus could have been stopped in its tracks, especially as the first cases were all in one neighbourhood. In Korea, a case rate of up to 1,000 new cases a day was successfully suppressed.

A more powerful WHO will be needed in the future, alongside physical and technological resilience.

The insurance industry should also take some lessons from Covid-19. “In retrospect it was not smart PR for insurers to provide a product called business interruption [BI], but with a clause in the small print explaining why it would not pay out in a pandemic,” according to Muir-Wood. “In many regions, BI from a pandemic is more likely than BI from a natural catastrophe. The coverage should have been clearly labelled fire and nat cat BI.”

A pandemic on this scale was thought to be a 1-in-100-year risk, but this is the third deadly coronavirus to emerge in 20 years. It’s time that the tools available to manage the next new disease are not the same ones we’ve been using since the plagues of the Middle Ages.

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