Best's Review


The Last Word
A Model Approach

COVID-19 is shining a spotlight on the need for predictive infectious disease modeling to help insurers project the onset and spread of costly outbreaks.
  • Lori Chordas
  • June 2020
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The COVID-19 pandemic has insurers, and the world, thinking about how to track the onset and spread of disease. Robert Muir-Wood, chief research officer at catastrophe risk modeler RMS, offered some insight.

“The challenge with any type of catastrophe is that we never know what will come next—the next hurricane, the next earthquake, the next influenza outbreak,” Muir-Wood said. “When it comes to a disease outbreak crisis, what we do know is that there is a wide range of possibilities and disease types and we can model how infectious they are, how lethal they may become and project incubation periods for those infected with a virus.”

As of late April, RMS' infectious disease model estimated that while 81% of COVID-19 cases were mild and could be treated at home, 14% were considered severe and required hospital care and around 5% were deemed potentially fatal, requiring intensive care.

RMS introduced its infectious disease model in 2006. Since then, the model, which uses data and assumptions to understand the impacts of an outbreak and its likely progression, has yielded some powerful projections.

Several years ago, the model calculated that the breakthrough of a universal flu vaccine could potentially confer immunity to half of the world's population and reduce the risk of a novel flu pandemic outbreak by as much as 75%.

RMS' model covers 59 countries and measures the speed at which a pandemic spreads through the population. It also captures the impact of age using demographic profiles and pharmaceuticals and vaccines to account for the reduction in mortality, and case fatality and infection fatality rates help project the virulence or severity of a pandemic.

While losses from the spread of infectious disease have historically fallen on life and health insurers, COVID-19 shows how vulnerable insurers across all lines of business can be to a global pandemic. Event cancellation, travel insurance, business insurance, workers' compensation, directors and officers and general liability coverages have all felt some pressure and losses from the current outbreak.

“Insurers are not only wondering what types of claims they might see and how this and future pandemics could impact their markets, but they're also questioning what it would take to make it more likely we can stamp out a pandemic like COVID-19 from the start and whether those actions could prevent its spread,” Muir-Wood said.

The outbreak of highly contagious diseases dates back to 430 B.C. in Athens during the Peloponnesian War. Since then, plagues, leprosy, the Black Death and other pandemics have destroyed a large swath of the world's population. However the highest profile event remains the 1918-1919 influenza pandemic, which claimed at least 50 million lives worldwide and generated what at that time was about $100 million in life insurance losses.

RMS uses data from that historic event as the benchmark in its model to assess pandemic risks, Muir-Wood said. “Reproducing that single scenario in today's environment raises a number of questions for the industry, including the relationship between age and mortality in a pandemic, whether the quick discovery and delivery of a vaccine could impact the spread of disease, and the financial toll pandemics can have on the global economy,” he said.

Muir-Wood expects COVID-19 to drive a number of significant changes in the industry, including an increased appetite among insurers to write more pandemic-related risks and new changes to infectious disease models, including estimations on secondary impacts of a pandemic beyond just the life and health insurance markets.

Lori Chordas is a senior associate editor. She can be reached at

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