Pandemics: A warning from history

18 September 2018

If another deadly infectious disease was to appear, what will be the impact on insurers and how well will society cope with it?

Richard Jameson, Partner, JLT Re

This year marks the 100th anniversary of one of the worst global influenza pandemics in recorded history. 

Nicknamed the Spanish Flu, the deadly virus spread from First World War troop staging and hospital camps in France to every corner of the world, including Asia and Africa. 

It’s estimated that 500 million people were infected and between 50 million and 100 million died as a result.

Unusually for a flu outbreak, healthy young adults were badly hit and the infection spread quickly in the summer months – as opposed to winter. 

The new H1N1 strain of flu caused a response known as cytokine storm where young adults’ immune systems are overstimulated, causing organ failures.

About one third of the world’s population was infected and of those that caught the bug, between 10 per cent and 20 per cent died. 

Of course, there have been other outbreaks in the past 100 years: the WHO estimates that the Asian flu outbreak of 1957 killed around 2 million people, and the 1968 Hong Kong flu pandemic killed around 1 million people worldwide. 

More recent outbreaks of avian flu and severe acute respiratory syndrome (SARS) – a life threatening form of pneumonia – have focused insurers’ minds on the risks posed by an outbreak of disease that’s as deadly as Spanish flu.

It’s clear that although flu viruses are better understood today, the world has become more at risk from pandemics. 

International air travel helps the spread of disease, as do bigger, more densely populated cities.

The potential for widespread deaths represents a human tragedy but the economic impact will also be significant. 

It’s believed that the 2003 SARS pandemic caused global economic losses of between US$30 billion and US$150 billion.

The World Bank estimates that global costs from a serious pandemic could reach US$800 billion.

Last year, the World Bank launched the first-ever bonds to combat pandemic outbreaks in the world’s poorest countries. 

Swiss Re Capital Markets was the joint structurer and sole book-runner for the cat bond transaction.

Insurers could take a big share of losses from a pandemic that hits mature economies.

For life and health carriers, the mortality risk and potential for increased health costs is clearly huge. 

Pandemic flu model

The catastrophe risk modelling firm AIR Worldwide, which offers a pandemic flu model, estimates that the 1918 pandemic caused life insurance losses of nearly US$100 million, which is comparable to nearly US$20 billion today.

Property-casualty insurers also stand to experience a surge in claims, not least because the global economy is far more interdependent and more vulnerable to disruption than in previous generations. 

Many forms of liability covers could be hit, including general liability, D&O, medical malpractice, as well as specific products that include business interruption and event cancellation.

But insurers also need to address possible secondary impacts to do with reduced staffing across emergency services, for example – as well as in our own workforces, affecting business continuity.

For most, it’s not a question of whether another deadly infectious disease will appear, but when and how well society will cope with it.

 Please contact Richard Jameson on +44 (0)20 7886 5311 or


Political Risk: striking a balance

Read more

Download Risk Perspective Summer 2018

Download the .PDF

Healthcare Insights

Read more