The Emerging Risks Team at Lloyd’s has issued a new report on the threat posed by a global pandemic.
Its report “Pandemic - Potential Insurance Impacts” focuses on the threat to the global business community and, in particular, the insurance markets of a global pandemic.
The report concludes that a pandemic is inevitable, explaining that with historic recurrence rates of 30-50 years it is prudent to assume that a pandemic will occur sometime in the future.
Trevor Maynard, Manager, Emerging Risks, at Lloyd’s and the report’s author says: “The significant message is that society should not optimise to one particular scenario as a worst case. Much has been said of the 1918 Spanish Flu epidemic, which is said to have killed up to 100 million people worldwide. While Avian Flu is seen as the most likely next pandemic, we have to ensure we are prepared for other types of pandemics that may require different responses and pose different challenges —some of which may well have higher rates of mortality than flu.”
The report explores the threat of pandemic in terms of insured losses, with Maynard saying the economic impact could be significant depending on the scenario.
“The threat of pandemic to the global economy cannot be underestimated,” he explains. “If you look at the example of a recent limited pandemic, such as SARS, the regional economic impact was severe and a repeat of the 1918 Spanish Flu outbreak, even without the current economic conditions, would be expected to reduce global GDP by between 1% and 10%.”
The report warns businesses that failure to take adequate steps to prepare for any pandemic could leave them and their insurers at target for Directors’ & Officers’ claims.
“In some respects business leaders have to ensure that they are not the odd one out, particularly given the large volume of information that is available to help with planning,” adds Maynard. “You do not want to be the one business that has not taken adequate steps to prepare contingency plans in the case of a pandemic and see your business perform worse than your peers.”
