Articles - Infectious disease and what COVID19 revealed in insurability

 

What was less well understood was how a health emergency could propagate through systems, creating simultaneous operational, economic and insurance impacts across sectors and geographies. Shortly before the outbreak, it had also been shortlisted as a severe disruptor within our airport risk index project with Cambridge Centre for Risk Studies, a risk capable of halting operations across global transport networks. The emergence of COVID-19 did not introduce a new risk. It revealed how an infectious disease event could cascade through economic, operational and insurance systems.

 

As the pandemic unfolded in 2020, the Willis Research Network also worked with , a specialist in infectious disease analytics, to deepen understanding of how outbreaks could spread and translate into organisational, economic and insurance impacts. This work reflected WRN’s broader role: connecting scientific modelling with the practical challenge of resilience. It examined not only the infectious disease hazard, but also how climate change, urbanisation and growing connectivity could shape exposure and vulnerability, increasing the potential for zoonotic epidemics to develop into wider pandemics.

 

COVID-19’s impacts extended far beyond healthcare systems. The virus triggered a cascade of disruption across multiple domains:

 

 

These effects were not isolated. They occurred simultaneously across geographies and sectors, showing how a health event could become an economic shock, a financial stress and an operational disruption.

 

This reflects a defining feature of pandemic risk: it is inherently systemic. A single trigger propagates through systems, creating correlated losses that unfold over time rather than as a single event. It also aligns with a core finding from the WTW Emerging and Interconnected Risks Survey: no risk operates in isolation, and impacts often arise from how risks combine and cascade. Formal assessments that treat risks as independent can underestimate the scale, speed and secondary effects of major shocks.

 

For insurers, the significance of this systemic behaviour was not only the scale of disruption, but the way losses accumulated across portfolios  simultaneously and over an extended period. Traditional insurance relies on diversification: losses are expected to occur independently, allowing them to be managed across a portfolio. COVID-19 challenged this assumption. Instead of diversification, the industry faced global correlation: losses occurring everywhere at once, testing policy wordings and coverage assumptions. This created three core challenges for insurability:

 

Events that affect all regions simultaneously cannot be offset across portfolios.

Losses were driven not only by the disease itself, but by policy decisions, behavioural responses and network effects.

The economic impact exceeded what private insurance markets could absorb alone.

 

These dynamics exposed significant protection gaps, particularly in business interruption, where many losses fell outside traditional coverage structures.

 

COVID-19 was not a failure of foresight. It was a failure to translate foresight into resilience. The pandemic exposed the gap between recognising a risk in theory and building the capabilities, partnerships and financial mechanisms needed to withstand it in practice.

 

This same idea of national preparedness and resilience shaped WTW’s involvement in the National Preparedness Commission, which emphasised whole-of-society approaches to crisis readiness. The lesson was that preparedness cannot sit with any single institution: it depends on stronger connections between government, business, science and civil society before crises unfold.

 

Despite the scale of COVID-19, pandemic risk has already begun to fall down many organisational risk agendas as attention shifts towards technology, cyber and geopolitical risks. But this reflects changing attention, not changing likelihood. The underlying exposure remains, even as focus moves elsewhere.

 

For pandemic risk, the implication is clear: preparedness is not a one-off exercise after a crisis, but a capability that has to be maintained after attention moves on. The key question is whether organisations and markets will sustain the memory, partnerships and practical tools needed to respond before focus shifts elsewhere.

 

COVID-19 prompted a reassessment of how organisations approach emerging risk, particularly where risks are systemic and difficult to model using historical data alone. It reinforced the value of scenarios and storylines as practical tools for exploring uncertainty, testing assumptions and supporting decision-making.

 

COVID-19 should not, however, become the new worst-case benchmark. Although globally disruptive, it did not combine the highest plausible levels of transmissibility and severity. A future outbreak could produce a more extreme tail-risk combination, with faster spread, greater mortality or morbidity, and deeper disruption to critical systems. Scenarios should test conditions beyond recent experience, rather than treating the last crisis as the outer limit of what is plausible.

 

The implications also extend beyond infectious disease. Climate, cyber and supply chain risks share similar characteristics: losses across regions and business classes can be correlated, disruption can spread across systems and dependencies can amplify shocks. Each raises similar questions about diversification, modelling and scale. COVID-19 demonstrated how globally synchronised, long-duration disruption can challenge traditional assumptions about insurability.

 

The Willis Research Network was founded to bridge science and real-world risk management. COVID-19 reinforced the importance of that mission. It demonstrated three key takeaways for future resilience:

 

 

Perhaps most importantly, it highlighted a recurring challenge: risks can fall from attention more quickly than they fall from reality. The next pandemic may not arrive as a surprise — but whether it is insurable may depend on which lessons endure, which uncertainties remain under scrutiny and whether leaders invest in finding the answers before the next crisis exposes the gaps.