Pandemic risk: Impact, modeling, and transfer

• Author: Joseph Qiu
• DOI: http://doi.org/10.1111/rmir.12160
• Date: 01 December 2020
• Published date: 01 December 2020

Risk Manag Insur Rev. 2020;23:293–304. wileyonlinelibrary.com/journal/rmir

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293

Received: 10 June 2020

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Accepted: 10 November 2020

DOI: 10.1111/rmir.12160

INVITED ARTICLE

Pandemic risk: Impact, modeling, and transfer

Joseph Qiu

American Risk and Insurance Association,

Malvern, Pennsylvania, USA

Correspondence

Joseph Qiu, American Risk and Insurance

Association, 22 Broad Leaf Trail, Malvern,

PA 19355, USA.

Email: shuo.qiu@gmail.com

Abstract

COVID‐19 has proven that pandemic risk deems to

the type of catastrophe risk that needs to be treated

seriously, by both society and the insurance industry.

A key element to measure, manage, and transfer

pandemic risk is the modeling capability. This paper

first reviews the insured loss from COVID‐19 and the

impact on the insurance industry. Then, current

pandemic risk modeling capabilities and how in-

surance industry uses these models are evaluated.

Some suggestions are made in terms of how these

models can be improved in the future and how they

can assist in insuring the pandemic risk. Finally, the

nonmodeling elements of pandemic risk transfer and

the government's role are discussed.

KEYWORDS

insurance, model, pandemic risk

1|INTRODUCTION

The COVID‐19 global pandemic outbreak has created an unprecedented impact on global

economies, local communities, and individual lives. Academic literature evaluating the impact

of this global pandemic has been created. For example, Chetty et al. (2020) built an economic

tracker to measure the impact of the COVID‐19 crisis on economic activities and document the

real‐time impact. Baker et al. (2020) studied the impact of voluntary social distancing and

government restrictions and argued that these actions led to extraordinary impact on the

market, economies, and society that was not seen in the prior history, including the 1918

Spanish Flu. In the industry, Dan Glaser, the CEO of Marsh and McLennan Companies, has

described the crisis as “two black swans that occurred at the same time.”As a public health

crisis, COVID‐19 has been a pandemic event most of the living population has never

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© 2020 The American Risk and Insurance Association