Going viral

A virus from an unknown source, Middle East respiratory syndrome coronavirus, or MERS-CoV, came to public attention two years ago and since then it has spread from its Middle Eastern roots to register deaths in both France and the United Kingdom. How the situation develops from here remains to be seen, but the World Health Organisation (WHO) is under no illusions about its deadly potential.

The world got a glimpse of the toll a serious pandemic could take in 2003, when the SARS outbreak killed 800 of the 8,000 people infected and cost the world a staggering $54bn.

The World Bank estimates that, in a worst-case scenario, a novel flu virus could infect 30-40% of all people. Business and consumer confidence would plummet, worker absenteeism would rise sharply, and public services would falter. 

Pandemic Preparedness

One of the major problems in preparing for the next pandemic is identifying where it will come from and what it will look like.

Until a virus actually shows itself and scientists understand its make-up and its mode of transmission, there is little they can do to create the drugs required to treat those who are infected and to vaccinate those who are not.

The ongoing trend towards globalisation also speeds up the likely spread of any virus, making it more difficult to contain. Airport hubs play host to millions of passengers each year, while railway stations, tube systems and ferry terminals are busy virtually 24 hours a day. Goods are transported around the world, food is sourced from all four corners of the planet and there are few if any populous regions that are truly isolated.

Following the H1N1 influenza pandemic in 2009, the WHO commissioned the report Strengthening Response to Pandemics and Other Public Health Emergencies to examine the effectiveness of the International Health Regulations and how they helped in responding to this pandemic. Its findings, released in 2011, stated: “The world is ill-prepared to respond to a severe influenza pandemic or to any similarly global, sustained and threatening public health emergency.”

Insurable risk

In the general insurance market, the status of a pandemic will have a major bearing on the losses borne by carriers. In the travel insurance market, for example, formal notice of an outbreak will no longer allow it to be classified as an unforeseen event, and this would effectively limit the losses sustained. Insurers would also put exclusions on cover to the most affected areas, further curtailing their exposure.

Meanwhile, in specialist lines of businesses underwritten specifically for the risks posed by pandemics, the potential losses are pretty well quantified and understood.