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Esko Kivisaari
Chairperson AAE Artificial Intelligence – Data Science Working Group |
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There will undoubtedly be a new pandemic sooner or later. We do not know when it will emerge, but it may be soon: in August of this year the head of the World Health Organization (WHO) declared that the rise in mpox cases already constitutes a public health emergency of international concern, while on 14 July the USA’s Centers for Disease Control and Prevention (CDC) reported five new human cases of the H5N1 avian flu virus – bringing to nine the total number of cases reported since April. We know H5N1 can be transmitted from animals to humans in some cases; it remains to be seen if and when it will become transmissible from human to human.
In June 2021 the AAE published a paper on the insurability of pandemics, looking at what did and did not work with respect to insurance and Covid-19, examining the matter of insurability and what factors make it difficult for insurance to help societies cope with a pandemic. It specifically considers issues including the problem of business continuity under lockdowns. While the AAE paper acknowledges that not much could be done while we were in the midst of Covid-19, it focuses instead on what should happen as we wait for the next pandemic to arrive. It concludes that a lot of work is required to ensure societies are better prepared for the future.
If we think back to 9/11, terrorist acts were uninsurable in many ways when the attacks happened – but developments since then mean that terrorism is now largely insurable. Similarly, Covid-19 was uninsurable when it happened – and now there is an opportunity to make insurance more effective for the next pandemic event. Some progress has been made here but more is needed, and insurability continues to be tricky.
Some specific areas are in a better position for next time: insurers Insurers have implemented more clarity concerning treaty wordings’; there is more understanding around how to implement governmental actions. Of course vaccine development has taken great strides forward and we have learned a lot about how to implement vaccination programmes, etc.
The AAE paper points out that one of the main difficulties in insuring the consequences of a pandemic is deciding who is responsible for what. It also notes that even when risk units are heavily correlated during a pandemic, damage can be limited through the implementation of clever mechanisms. With effective preparation measures, businesses could be made aware of the risks and of how those risks can be mitigated by means of insurance or loss protection. It puts forward the possibility that insurers could offer cover to a degree that means the total risk is still tolerable – and societies could create reasonable backstops to enable the sharing of risks to operate.
While some improvements are already evident, essential problems remain unanswered. The biggest issue is that the losses are obviously too high to be covered solely by the insurance industry. Addressing this requires public private partnerships (PPPs) – but none have been established. A continued lack of clarity in this area will make it impossible for the market to offer any wider help with weathering the next pandemic.
Mpox, avian flu, something else: even with the writing on the wall, there has not been enough action to support insurability when the next pandemic strikes. Isn’t it time we start preparing?
29 August 2024
This blog is written on a personal title.
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