This week we have a “pandemic podcast” special edition. A series of interviews recorded on Thursday 12 March, the day after the WHO had declared Covid-19 Coronavirus a pandemic.
In this 40 minute edition Matthew Grant sets the scene for exploring the potential for new and established innovation, analytics and data to help manage the spread of the virus in the short term, and improve insurance offerings and understanding and mitigation of the risk in the future.
Matthew reviews the context of the pandemic to understand how what we are hearing in the news compares to medical opinion, talking to Dr Chris Martin. Whilst there has been modelling of pandemics and research in the medical community, it’s been somewhat limited for insurance purposes. Robert Muir-Wood, Chief Research Officer for RMS, the catastrophe modelling company provides an overview of the issues, the impact from an insurance perspective and how Covid-19 can be modelled and losses estimated.
The impact on the insurance industry will be significant. Sam Casey from Insurance Insider, has been talking to insurers and provides an assessment of the breadth of covers affected, and some of the largest unknowns such as the potential for cancellation of the Tokyo Olympics. Nick Wildgoose, formerly responsible for supply chain at Zurich Insurance, explains some of the challenges and potential pinch points.
SparkBeyond is providing AI tools to help the Italian government understand and manage the spread of the virus and Alex Easaw explains what they have been finding.
Matthew released a companion article to this podcast on Saturday, available here on Linkedin. We are planning to continue to review the lessons to be learnt from Covid-19, impact on the insurance industry, data sources available and opportunities for innovation.
Thanks to all our guests for taking the time to speak to us at a busy time, and Peter Roach of Visual Monkeys for the fast turnaround of this episode.
Pandemic Podcast Special – Key insights from Episode 72
Dr. Chris Martin – Director and Head of Modelling, Crystallise Limited
Can you give some medical context around how Covid-19 pandemic relates to other types of pandemics you have modelled?
The Covid-19 pandemic is a Coronavirus similar to Middle East respiratory syndrome (MERS) and severe acute respiratory syndrome (SARS). It looks like the mortality rate is much lower than with MERS and SARS, probably 1% or even lower, but that is still significantly higher than for seasonal influenza.
The difference with Covid-19 is that it is very infectious and it’s uncontrolled. There’s going to be extremely large numbers of cases for the next 18 months to two years.
How has modelling pandemics improved over the last 10 years?
The newer area is agent-based modelling, where individuals or small collections of people are modelled as objects that are agents that interact with other agents, which lends itself to infectious disease modelling.
The difficulty with agent-based models of infectious disease by countries is they’re extremely demanding of computing power, but as computing power gets more available and cheaper, increasingly people are using that because it’s possible model far more sophisticated scenarios around intervention for example.
Robert Muir-Wood – Chief Research Officer, Risk Management Solutions
In terms of the impact on the insurance industry, how significant is what’s happening right now?
This really is the one in a hundred-year event. The event that we’ve been thinking about, modelling and focused on for some time. It’s going to have very significant impacts on many countries in the world, the financial markets and the insurance industry too.
It’s going to affect a wide range of insurance coverages. But a significant number of them have the potential to be uninsured and there may be clauses in contracts saying they would not pay out under conditions of a pandemic or epidemic.
How has risk modelling around pandemics changed?
There’s been more focus on the variety of pandemic types, than actually looking at the consequences of economic sectors and how they could be affected.
We’ve talked about, airlines, travel companies, cinema operators, who are going to be most exposed if people self-isolate. However, there’s more modelling work to do on the progress of a pandemic through time to see how these individual sectors will be impacted.
Are you issuing loss estimates to help clients do their modelling?
We are releasing guidance around events in our pandemic model, where we’ve considered a wide range of infectiousness and loss of life. We are indicating which of these scenarios our clients should be focused on.
In particular, we have learned the degree to which a government can actually get on top of the situation, which is completely new. There have been attempts at quarantine in the past, which we can learn from and have been successful. What China has done and what Italy is trying to do is novel and probably needs to be included in the details of the modelling going forward.
Sam Casey – Reporter, Insurance Insider
What are the early signs of how the Coronavirus is affecting insurance? Are there already sectors where you’re predicting big losses?
The biggest potential sources of loss from this event are likely to fall in the contingency market. We’ve seen a spate of cancelled music festivals, conferences, etc and a lot of those are insured.
In a typical insurance contract, especially on the London market, there’ll be a list of the exclusions and one of those typically used in the encapsulation market is for communicable diseases.
If Coronavirus is being specifically excluded from potential event cancellation cover, that really becomes a market-wide theme. It’s very difficult at this stage for anyone to predict how this situation is going to evolve.
One of the major events coming up is the 2020 Olympics in Tokyo. How big would the financial implications of that be if it is cancelled?
There’s a huge concern in the markets about the potential for the Olympics to be cancelled. Along with the World Cup it is by far the largest contract out there in the market. Certain underwriters have told me it could be almost catastrophic for particular segments and businesses.
At the moment the International Olympic Committee is adamant that it’s going to press ahead, but of all the events which could be cancelled, that would by far be the biggest insurance hit.
What is the mood amongst individual insurance companies?
in terms of the insured losses, there does appear to be a reasonable amount of confidence in the market, but there are obviously huge issues about potential disruption.
if this had happened five years ago when the market was still trading with emails and on paper, it would have been much harder for it to cope. The developments in technology which have been seen only recently offer a real opportunity to have a business as usual scenario going forwards.
Alex Eashaw – Impact Strategist, SparkBeyond
How are you helping understand the impact of the pandemic?
We’ve been approached by government officials in Italy to help them manage Covid-19 risks. One of the major areas they are looking at is social distancing, but there’s a cost element associated with that.
We are helping them find out what is the best way to take these different actions and to help identify the emerging risks in those areas. We provide a heat map of the different emerging risks so that they can practically take different actions.
You’re using AI to do that. What lessons can we learn from what’s coming out of the analytics?
The insights that are generated are very little help if it isn’t possible to explain the underlying reasons or factors behind it. So, we’re helping our clients understand whatever insights are being generated and then sharing the underlying reasons so they can make some really strategic decisions.
Speed is important in a situation like this. How does your platform work?
We operate in the advanced analytics space and like to think we help shape our customers’ futures, rather than just help predict it. The data we look into is not just organisational data but untapped public data including open-source maps, demographics and other economic indicators.
Our platform generates around four million hypotheses per minute, crunching both the public data and the organisational data. We generate millions and millions of hypotheses to give our clients the top actual insights for organisations to ingest.
Nick Wildgoose – Independent Supply Chain Risk Consultant, Supplien Consulting
What can you tell us about supply chain issues being caused by the pandemic?
They’re unprecedented in a way. I experienced the issues with the Thailand floods in 2011 and the Japanese Tsunami, which caused around £300bn worth of impact on the world’s economy, but I think Coronavirus is going to be even bigger.
It brings out the interconnectedness of the global supply chain. Clearly, you’ve had the impact of many shutdowns in China. Just to pick out one statistic there, the American economy is taking in over 35% of its import of intermediate products from China, so you can see the huge ramifications just on that economy.
What’s the current state of modelling and prediction for supply chains?
The Coronavirus has further illustrated how companies who have invested in the technology and data feeds to understand where their key suppliers are, and where they ship through, are at a tremendous advantage over those companies that haven’t done that.
The more advanced ones have not only done their first-tier suppliers but their second and third-tier suppliers as well. As soon as they were detecting that China was shutting down back in early January, they could begin to assess the potential impact and start to take mitigation action to secure inventory, or ship stuff out.
What are the lessons that companies can learn from the Coronavirus outbreak?
That it’s a time of great opportunity for technology. The availability of big data, the increasing use of AI and machine learning based on better quality data. Being able to detect issues in China that potentially impact on companies, to enable them to better protect the brand.
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