An investigation into the insurability of pandemic risk

This report discusses the pivotal question of whether pandemics are a type of risk for which the insurance industry can play any kind of role or if this is the type of risk where traditional insurance products are not the solution. COVID-19 and the shutdown measures adopted by many governments to contain it have plunged the global economy into the deepest recession since the Second World War. For the global insurance industry, too, the pandemic is a severe loss event. Despite this massive strain, initially exacerbated by a steep decline in capital markets, insurers worldwide promptly paid legitimate claims in all areas where pandemic risk was intended to be covered; for example, under life, health and event cancellation policies. The extent of correlation and aggregation of pandemic losses for businesses across the globe has put the insurability of pandemic risk in the spotlight.

This report provides four conclusions:

1. Pandemic risk is a multi-faceted phenomenon.
2. Pandemic BI risk associated with nationwide government-mandated lockdowns is uninsurable for the private P&C insurance industry.
3. Life- and health-related pandemic risks are generally non-systemic in nature and covered by most mortality- and morbidity-based policies, at affordable prices and with wide availability. 
4. Analysis suggests that public and private-sector decision-makers should resist the temptation to measure pandemic risk by a single yardstick.