Ill prepared?

Ill prepared?

There’s nothing new about the pandemic threat, but as populations grow and diseases evolve, so too must the global response

By Andy Swales

AS THE MOSQUITO-BORNE ZIKA VIRUS spreads from Brazil through Latin America and beyond, the word “pandemic” is once again on risk managers’ lips.

While there may be some debate over exactly when the term should be applied, its most basic definition is a disease that spreads worldwide or over a wide area, usually affecting a large number of people.

Zika was labelled a “pandemic in progress” by US experts Anthony Fauci and David Morens in the New England Journal of Medicine in February.

The virus – which, it is thought, can also be transmitted sexually – is often symptomless and causes relatively mild illness, according to the Australian Department of Health.

But it also has been associated with severe congenital conditions such as microcephaly – abnormal smallness of the head – in babies born to infected mothers, and the onset of the autoimmune disease Guillain- Barre syndrome.

At the end of March the Zika outbreak had spread to Caribbean and Pacific nations, with isolated cases identified in countries including Australia and the US.

The World Bank’s initial estimate in February for Zika’s economic impact this year in Latin America and the Caribbean is a “modest” $US3.5 billion, or 0.06% of GDP.

It follows the horrific Ebola outbreak in west Africa in 2014-16 – with more than 28,000 cases and 11,000 deaths, according to the World Health Organisation (WHO) – and several flu scares since 2005. No wonder insurers have flagged pandemics as a key threat to the industry.

Keeping pathogens at bay: German tropical medicine specialists clean up at a quarantine station in Berlin

Swiss Re’s latest SONAR report on emerging risks rates “rising pandemic risk” as a medium-impact threat over the next few years.

But as Regis General Manager Risk Management Services Harry Rosenthal notes, it is “drawing a long bow” to describe pandemic as an “emerging” issue.

He points out the Black Death plague outbreak struck more than 600 years ago, killing hundreds of millions in Europe and Asia.

And last century alone there were three major flu pandemics, starting with the 1918 Spanish flu outbreak that killed more than 50 million people worldwide.

“We have always been fighting microbes, and only since the development of antibiotics have we had the – false – belief that we’ve won over the world of pathogens,” Mr Rosenthal tells Insurance News. “This thought is very incorrect, because our opponents are crafty, and are continuously working around our defences.”

It is not a question of if more events will follow this century, but when.

“To call pandemic emerging risk is technically wrong because we know it is going to happen,” Mr Rosenthal says.

“We don’t know what is the vector, what is the disease? The trick is responding at the right moment.”

It’s a trick that was missed when Ebola recently hit Guinea, Liberia and Sierra Leone.

Mr Rosenthal, who oversees risk management in the Australian university sector through mutual scheme Unimutual, says global bodies such as the WHO “really waited too late [to respond], and as a result it was the worst outbreak in history”.

“With other viruses, if you respond early and contain it early, you do quite well. It’s clear the response to the Ebola outbreak was quite late – they weren’t able to contain it. Ebola comes around every 13 or 14 years, but this one just got away from them.”

Swiss Re says the Ebola epidemic “fortunately did not develop into a global pandemic due to the poor international connections of the West African region”.

Mr Rosenthal believes the response to Zika has been more impressive, despite some major challenges.

“They really got on that quite early. It was more difficult, because instead of person-to-person transmission [like Ebola] it’s a mosquito-borne vector. You’ve got to control mosquitoes, rather than human contact.

Most of our antibiotics are becoming rapidly ineffective due to the way we abuse them in the commercial production of cattle and poultry, rendering them less effective on the human population.

Tiny but deadly: larvae of the Aedes Aegypti mosquito are being used in research on the Zika virus outbreak in Brazil. This mosquito is a carrier of a range of diseases.

“Give me human contact any day – I can build a wall around a city, I can’t keep mosquitoes out.”

The World Bank says it is estimated an “airborne, Spanish flu-like outbreak today would kill more than 33 million people in 250 days”.

And estimates of the cost of a severe outbreak could be as much as 5% of global GDP – or $US4 trillion.

And Swiss Re warns the means of transmission is growing.

“The number of hosts for virus reproduction is increasing: human population worldwide went from about 3.5 billion in 1967 to about 7 billion in 2010,” the SONAR report says.

“Animal stocks have also increased massively. This represents a big reservoir for new severe pathogens that could lead to a global pandemic if an urban region with good intercontinental connections is affected.”

Mr Rosenthal says the emergence of a “slightly more virulent” flu virus is a major concern, given how quickly and easily the disease spreads.

“A... flu virus, say, with a 2% mortality rate, would kill tens of millions in today’s population numbers,” he says. “This is a concern, because we are dealing with an adversary that knows how to travel on airlines effectively.”

He also notes the threat from antibiotic-resistant pathogens. “This scenario is quite possible, because most of our antibiotics are becoming rapidly ineffective due to the way we abuse them in the commercial production of cattle and poultry, rendering them less effective on the human population.

“Secondly, antibiotics are not good money-spinners for pharmaceuticals, under our current model of drug protection.”

He warns this “is creating a perfect storm for some opportunistic pathogen”.

The SONAR report focuses on the fairly obvious pandemic impacts for life and health insurers, but general insurers too could take a hit.

A recent report from Lloyd’s says a repeat of the Spanish flu outbreak could prompt a global recession, and lead to impacts on insurance lines including general liability, workers’ compensation, medical malpractice, marine, business interruption and travel. It could also lead to a major slump in insurers’ investment income.

Historic worst: the so called Black Death that swept Europe from 1346 to 1353 killed as many as 200 million people - about 60% of Europe's population.

It’s like saying we are good at fire suppression... I think it’s better to be good at fire prevention.

Mr Rosenthal says the Australian higher education sector faces risk because many students and researchers work with overseas governments and NGOs, or carry out volunteer work, often as part of the response to disease outbreaks. Many others travel to learn or for pleasure.

“We tend to keep a very close watch on pandemics, because often it does put our people at risk,” he says.

Unimutual advises universities on potential risks, often drawing on the research of its members.

“When the avian flu was very active, we sent out three or four [risk notices] because members would update us and we would share that with the sector.

“That’s why we’re very attuned to this, because we try to leverage off the knowledge of the entire sector.

“It’s my job to identify these [threats] as early as possible. Sometimes it’s significant, sometimes it’s not, but I’d rather have 10 false alarms than miss the real fire.”

He says Australians are “are first-class world travellers” with good awareness of perils and precautions, while Australia itself “has extremely good, robust policies, procedures and protocols [for disease threats]. It’s actually mind-blowing. We’re damn good at it.”

However, there are gaps in the detection and surveillance of outbreaks around the world that must be addressed. Rapid response is fine, but “it’s like saying we are good at fire suppression... I think it’s better to be good at fire prevention”.

And after recent scares that amounted to little – in this part of the world, at least – another risk is complacency, according to Mr Rosenthal.

“The issue is, because we haven’t really had a pandemic strike since the early 1900s, there’s been a view that, ‘Ah, spending a lot of money... why are we doing this?’ You can have that syndrome.

“That’s probably our biggest challenge as risk professionals looking at an emerging risk – that at some point, people are going to say, ‘You’re crying wolf.’”

A similar – but more baffling – kind of “first-world” attitude is flagged in the SONAR report.

“More people in some Western countries have started to refuse vaccination [for their children] against known and controllable pathogens, thus increasing the risk for an epidemic or even pandemic,” Swiss Re says. “The measles outbreaks in the US just before Christmas 2014 or in Germany early [last year] have shown how unvaccinated children can increase the epidemiological risk.”

Banking on an outbreak

The recent Ebola outbreak in West Africa has prompted the World Bank to establish the Pandemic Emergency Facility (PEF), to “enable a faster and more effective global response to a potential pandemic” and “be an essential piece of a broader pandemic risk management framework that extends from preparedness and early identification of outbreaks to epidemic response and recovery”.

The facility, developed with the WHO and other partners, aims to allocate funding early, to nip potential outbreaks in the bud rather than responding to them later.

The bank says the PEF – scheduled to be launched this year – features two financing pillars: an insurance mechanism that draws on insurance and the bond markets, paying out upon pre-agreed triggers; and cash or longterm pledges from development partners, “against which the World Bank Group could front-load funds”.

It says the latter component “will give the PEF flexibility to respond even more quickly in fast-moving situations before the insurance mechanism is triggered”.

The bank says the insurance aspect will “for the first time put a price tag on pandemic risk. It would purchase insurance coverage from the private sector on behalf of developing countries to cover the costs of containing disease outbreaks.”

It says the PEF will “help advance country investments towards universal health coverage” and, in time, is “expected to create a new market for pandemic insurance that will bring greater discipline and rigour to pandemic preparedness and incentivise pandemicresponse planning”.

“The PEF will encourage countries and development partners to build better core public health capabilities for disease surveillance and health systems strengthening towards universal health coverage.”

Swiss Re Head of Digital Analytics Innovation Daniel Ryan says his group and fellow reinsurer Munich Re “have been closely involved in the conceptualisation and development of the Pandemic Emergency Facility... Both are working with the World Bank and an independent modelling agency on how the facility might be structured in terms of triggers and the multiplicity of diseases that would be covered in different regions and locations around the world.”