Insurance in a Post-Pandemic World: New and Renewed Challenges

Because the pandemic has affected almost every aspect of human experience, it should surprise no one that the pandemic is having a major impact on the insurance industry, and the full extent of the financial fallout is still unfolding. The pandemic has weakened insurer balance sheets, hardened the insurance market, and stressed the claims environment. Yet despite continuing uncertainty about when the pandemic will be behind us, most observers believe that the pace of vaccinations and the effects of the federal economic stimulus have put us on a path to recovery.

Thus, now is an appropriate time to look beyond the pandemic and predict how the business of insurance is likely to be different in a post-pandemic world. In the short run, insurers will likely make changes in policy language to address pandemic risk more explicitly. Through these changes, insurers will seek to reduce litigation—especially with respect to business interruption coverage—when similar pandemic events occur in the future. In the long term, we may see greater use of parametric insurance (fixed payments made to insureds based on a triggering parametric event) and perhaps a more expansive role for government in providing or facilitating pandemic-related insurance coverage.

Immediate Impact: Weakened Balance Sheets and Hardening Markets

The pandemic’s financial shocks have affected insurance companies’ balance sheets in every product line.⁷ During Q1 2021, financial markets largely recovered from 2020’s declining asset values and increased volatility, but bond investments—the largest component of insurers’ investment portfolios—remain stressed due to continued risks of corporate defaults in an economy that remains disrupted. Plus, with interest rates near zero negatively impacting revenue—along with decreasing asset quality in commercial mortgage loans, mortgage-backed securities, and municipal bonds—insurers enter the post-pandemic world facing significant pressure on profitability.

The likelihood of increased insurer insolvencies is low, but the implications for industry profitability and liquidity and the availability of coverage are still being sorted out. The upshot is that the post-pandemic world will launch with tightened capacity, rising rates, and stricter underwriting standards.⁸

A Changed Claims and Litigation Environment

On the claims side of the business, the pandemic’s fallout has varied across product lines, sometimes in surprising ways.

Automobile. Take automobile insurance, for instance. Miles driven (both personal and commercial) plunged in 2020; predictably, the number of minor accidents declined, producing cost savings. Many insurers have refunded previously paid premiums to their policyholders, and debate continues over whether insurers have refunded enough of their unanticipated revenue resulting from reduced claims.⁹ Yet the number of deaths and serious injuries rose, and the rate of fatalities per miles driven skyrocketed.¹⁰ How this will sort out in the post-pandemic world remains to be seen.

Life. For life insurers, COVID-19 caused unanticipated and significant increases in mortality; but reduced longevity exposures in annuities, which now make up about half of life insurers’ business, largely washed out increased life insurance liabilities.¹¹

Health. For health insurers, treatment and testing costs for COVID-19 increased dramatically, but reductions in expenditures for non-COVID conditions, including routine and elective care, largely offset rising expenditures caused by the pandemic.¹² Surprisingly, the number of uninsured Americans may not have changed much during the pandemic. Employer-provided insurance appears to have dropped much less than employment, and those who lost insurance due to unemployment may have found coverage in the Medicaid program or in the individual marketplaces (i.e., healthcare.gov and the state exchanges).¹³ Just as the economy has changed, so has the world of health-care finance and access, and its shape upon a rebound is likely to be different.

Liability. At first glance, liability insurance would appear to be vulnerable to extreme disruption due to plaintiffs filing claims against policyholders for bodily injury arising out of failures to mitigate the risk of contamination or to give adequate warnings about these risks. The most anticipated commercial claims involve alleged negligence in protecting customers or invitees from exposure to COVID-19.

Yet the number of liability cases filed thus far has been very small. Possible explanations for the lack of litigation are that these claims face substantial legal hurdles, such as proving that the infection occurred at the defendant’s business establishment or residence and was caused by the defendant’s acts or omissions. In addition, since 2008, a communicable disease exclusion has been available for addition by endorsement to the widely used commercial general liability (CGL) form,¹⁴ and the existence of this language negating coverage has likely deterred some potential plaintiffs. Another impediment to these suits is that at least 16 states, with more certain to follow, have enacted liability shield laws that immunize businesses under certain conditions against COVID-19 liability claims.¹⁵

A reasonable forecast is that the claims environment in general liability insurance will be stable.

Directors and officers. The directors and officers (D&O) liability insurance market is a different story. Directors and officers are accountable for how they manage their company, regardless of the nature of the business challenges they face. Thus, D&O policies will be triggered by shareholder claims against corporate directors and officers for economic losses resulting from alleged inadequate responses to COVID-19, such as failure to adhere to government recommendations or requirements, prepare or implement adequate contingency plans, or disclose properly the risks posed by the pandemic to a company’s performance. Significant premium increases for D&O insurance in early 2021 show that insurers anticipate that they are on the cusp of a wave of shareholder litigation.¹⁶

Errors and omissions. Similar concerns exist about errors and omissions (E&O) coverage purchased by agents and brokers. In early 2021, few reports exist of claims being made against agents and brokers for failing to procure appropriate coverage for COVID-19 losses or uncovered liabilities, but successful denials of coverage by insurance companies will cause some policyholders to turn to the agents and brokers who helped place the coverage and to claim that they failed to procure adequate insurance. Although these claims will face significant hurdles, the possibility of E&O claims in large numbers is a matter of substantial concern in the industry.¹⁷

Workers’ compensation. The workers’ compensation market is another market that has been thrust into flux, as some workers who contract the virus assert that their infections occurred on the job and therefore trigger workers’ compensation coverage.¹⁸ The coverage issues involving what appears to be an “ordinary disease of life” are not simple when workers are required to encounter dangerous substances on a repeated basis as a part of their work responsibilities. Moreover, numerous state legislatures have made COVID-specific modifications to their workers’ compensation statutes, which can affect coverage determinations in some instances.

Yet premiums in this sector have, somewhat surprisingly, declined in 2020, and increases are not expected in 2021.¹⁹ This may be because most COVID-19 cases among workers involve only minor symptoms requiring the workers to miss work and quarantine at home.

In the post-pandemic world, a heightened emphasis on employee safety in the workplace is inevitable, which will greatly change the risk management aspects of the workers’ compensation market.

Property. By far, the most disruptive impacts have been felt in the property insurance industry, where standard forms routinely provide coverage for business interruption losses—and this coverage language has proved to be the source of the overwhelming amount of COVID-19 insurance litigation.

Almost all policies have triggering language that refers to “physical loss or damage,” which insurers argue means that a material alteration of the insured property must occur for business interruption to be covered. Policyholders argue that the triggering language contemplates—or can be reasonably interpreted as allowing—coverage when a gas, odor, or virus is so overwhelming as to render the property unusable, as distinct from the physical characteristics of the property being altered. In addition, some policies have exclusions for losses due to virus, bacteria, or communicable disease, which make pro-insurer outcomes more likely but not inevitable. Insurers have prevailed thus far in most of these cases, but many policyholders have been successful in resisting insurers’ motions to dismiss and for summary judgment.²⁰

During 2020, most business interruption litigation was initiated by small businesses forced to shut down or significantly curtail their business due to the pandemic, but 2021 is witnessing the advent of big-dollar claims brought by large businesses or business associations represented by large firms with coverage litigation expertise.²¹ This litigation will continue into the post-pandemic world, with the outcomes in these cases yet to be determined.

A Changed Coverage Environment Post-Pandemic

The evolution of policy language as insurers encounter unanticipated kinds (or magnitudes) of policyholder losses is a story as old as the insurance industry itself. The pandemic is already prompting coverage changes, a process that will play out over the next several years.

Take, for instance, event cancellation insurance, which is often purchased by sponsors of conferences, sporting events, concerts, trade shows, and other events to cover the risk of loss of revenue (and the inability to pay event expenses) due to circumstances beyond a sponsor’s control. Before 2020, most event cancellation policies contained an explicit exclusion for cancellations caused by a communicable disease, but it was common for insureds desiring this coverage to buy it back with an additional premium for an endorsement negating the exclusion. Not surprisingly, since early 2020, communicable disease coverage is not available from any insurer selling event cancellation policies, and many of these policies now include full exclusions for viruses generally and COVID-19 specifically.²²

The text of coverage provisions will be reevaluated in every product line, and an easy prediction is that changes will occur in many of them—although some of these changes probably will not occur until most cases in the litigation pipeline are resolved, lest changing the policy language becomes evidence that pre-change policy language in force in 2020 and 2021 provides coverage. Policy language in D&O and workers’ compensation policies will be tightened, and commercial and personal property policies will eventually receive a post-pandemic revision for business continuity risk. Some insurers did not include virus exclusions pre-pandemic, but it will be a rare post-pandemic policy that does not include a version of this exclusion.²³

Longer Term: Strategic Foresight Will Come into Play

Looking at the longer-term implications of the pandemic, this global catastrophe occurring in the context of a global information age may bring the emerging discipline of “strategic foresight” to the forefront of business and insurance planning. It is debatable how effective the insurance industry has been in anticipating future loss scenarios, and the correct answer no doubt varies throughout the industry by insurer and line of insurance. Yet it is difficult to dispute that businesses generally and the insurance industry specifically, especially in property insurance, failed to fully internalize pre-COVID the implications of a global pandemic on the scale that we are now experiencing.

The historical record suggests that insurers should have been more prepared. This record shows that the significance of the 1918–1919 “Spanish flu” pandemic for the business of insurance was discussed as it unfolded,²⁴ and insurers could not have overlooked that the 1957 flu pandemic and the HIV/AIDS pandemic, first identified in 1981, killed millions worldwide.²⁵ Even a casual look at the past shows that pandemics have appeared with regularity over the centuries, sometimes with history-altering impacts.²⁶

Yet the insurance industry had thought relatively little about the implications of communicable diseases for property insurance. And why should it? After all, a virus or bacterium does not, in and of itself, cause physical damage to property like that caused by a weather event, fire, or other force of nature; thus, accounting for viruses, etc., in property insurance policy language was not understood to be necessary.

But property insurance is also about loss of use, and it was not until the 2002–2004 SARS pandemic, the first of the 21st century, that the industry took note of how a pathogen might trigger loss-of-use coverage. Thus, some insurers post-SARS began to alter coverage based on pandemic risk by inserting exclusion clauses for communicable diseases, epidemics, and pandemics into most of their nonlife products,²⁷ but many forms were not changed. With the benefit of COVID-19 hindsight, it appears that commercial property coverage drafters did not think outside the box of a physical damage frame, assumed they had tightly drafted the coverage-triggering language, and did not adequately think through how the triggers they drafted would apply to time-element property loss in the context of a pandemic. As one commentator put it, “[t]heoretically, the industry’s . . . economic losses should be low given the fact that, for the most part, they did not underwrite ‘pandemic’ disruption. However, the degree to which coverage may have been unwittingly provided is going to be severely tested.”²⁸

Granted, it is difficult to estimate low-frequency, large-magnitude risks accurately, and history shows that catastrophic risk has been underestimated repeatedly. For example, Hurricane Andrew in 1992 caused nearly four times the economic loss thought possible at the time (and would have caused even more if it had hit Miami directly). After recalibrating post-Andrew the theoretical maximum-damage hurricane, preparing for the “next big one” caused experts to miss a scenario where eight smaller hurricanes would come ashore in Florida in two seasons (2004 and 2005), with combined damages nearly double that caused by Andrew.²⁹ The 9/11 Commission Report describes failure “in imagination” as one of the biggest contributing factors to the success of the terrorists’ attack.³⁰ The normalcy bias explains why individuals routinely underestimate catastrophic risk,³¹ but, as one study put it, “there is a systemic bias within many emergency management organizations that results in underestimation of risk.”³²

Thus, post-pandemic, expect insurance companies—and governments, businesses, and other organizations, all of which have been rattled by the pandemic—to buckle down on their efforts to imagine risk and how it can manifest itself in the future. A term we will hear more often is “strategic foresight.”³³ This label is already used to describe the discipline of imagining, under conditions of uncertainty, alternative futures and possibilities to the end of enabling an organization to become better prepared for potential threats. A reasonable prediction is that “strategic foresight” will become anchored in the lexicon (like “strategic planning”), and we will hear in press releases and other literature that insurers (and other organizations) are doing it. In the words of the title to J. Peter Scoblic’s recent op-ed in the Washington Post, “[w]e can’t prevent tomorrow’s catastrophes unless we imagine them today.”³⁴ Insurance companies already know this, but after the pandemic, they will take it even more seriously.

Will the Pandemic Promote New Ways of Thinking about Catastrophic Risks?

The routine of the insurance business is for policyholders to transfer risks to insurers, which then distribute those risks in pools they manage, occasionally with the assistance of reinsurance or other risk distribution instruments. However, some risks, such as the losses caused by a pandemic, are so vast that they challenge the ability of insurance markets to distribute them in reliable, efficient insurance pools.

These “catastrophic risks” have essentially two defining characteristics. First, they resist diversification. The fundamental premise of effective insurance is the insurer’s ability to diversify risk through the power of the law of large numbers. But the large numbers principle works only if the risks being pooled are independent of each other. When this assumption fails, as when every member of a large population (i.e., the insurance pool) is likely to be affected adversely by a peril simultaneously, diversification is at least difficult and may be impossible.

Second, catastrophic risks have higher levels of uncertainty in terms of frequency, consequence, or both. When uncertainty exists about the number of events that may happen in a time interval, it is difficult, and may be impossible, to calculate how much premium needs to be collected to cover losses. Similarly, when the magnitude or severity of consequences is uncertain, it is difficult to calculate the premium needed to cover the risk. Stated more formally, these uncertainties make it impossible to calculate an objective probability distribution to support premium calculations. If a risk cannot be priced with a reasonable degree of precision, the risk is difficult to insure. To illustrate, take the example of earthquakes. If an $80 billion earthquake happens (on average) once every 50 years, but the exact timing is unknown (and a possibility exists that two might happen within 10 years while none happens for a century), calculating the fair and adequate premium over these long time horizons may be impossible. In other words, a mismatch exists between consistent premium collections and highly inconsistent and unusually large loss payments.

Catastrophic risks are sometimes described as risks that are uninsurable, but there is much imprecision in the use of the term “uninsurable.” Uninsurable risks are often defined as those where the maximum possible loss is beyond the capital capacity of the industry, i.e., paying the loss would lead to industry insolvency. But portions of “uninsurable” risks can be transferred and distributed in insurance markets when coverage limits, interregional diversification, and global diversification via reinsurance are used to limit company and industry exposures. Although war is considered the classic uninsurable risk, niche coverage is available in markets for war, terrorism, political risks, riots, and commotion risks.³⁵ When government backstops and risk securitization are added to the equation, along with improved technologies that enable better predictions with respect to some kinds of catastrophic risk, the power to manage such risks is substantial³⁶—but not unlimited.

Natural disasters and terrorism are the most common examples of catastrophic risks; and a variety of tools—including government risk assumption through backstops, government-supported reinsurance, and investor purchases of insurance-linked securities—have resulted in some semblance of effective, if not perfect, risk management. But these perils differ from pandemics in obvious ways. For example, a hurricane will not flood the entire planet. Terrorism events (at least those experienced thus far) happen in a particular place at a particular time, and the effects, even if severe, are relatively concentrated. A pandemic—with COVID-19 being Exhibit A—is an event of such massive size that geographic boundaries are overwhelmed and event-to-remediation timelines are extremely long. These kinds of risks are so vast that they overwhelm private risk transfer and distribution mechanisms and can even challenge the strength of governmental institutions as insurers of last resort. These catastrophic risks sometimes are properly labeled “systemic risks,” denoting a subcategory of catastrophic risks that, when they occur, place potentially cataclysmic stress on risk-spreading mechanisms of every kind.

The numbers explain why a global pandemic is an example of systemic risk. With respect to COVID-19, the World Bank estimates global GDP loss for 2020 at $3.07 trillion (USD).³⁷ According to a Geneva Association estimate,³⁸ between $20 and $40 billion of this loss will be covered by business interruption insurance—roughly 1 percent of the loss. Insurers collected about $30 billion in business interruption premiums in 2020, which accounts for less than 2 percent of premiums in the entirety of the world’s property and casualty insurance market. This mismatch between economic losses and insurance coverage is staggering, but the sobering ratio embedded in these numbers is that the industry would need to collect the current year’s business interruption premiums for somewhere between 75 and 150 years to cover 2020 GDP losses.³⁹

Thus, the post-pandemic world will encourage new ways of thinking about business interruption losses caused by systemic risks. If business losses from a pandemic are determined to be covered or if policies are modified to provide such coverage, time-element coverages likely will be drafted with recalculated limits on total proceeds paid and the duration of a business interruption subject to coverage. Some current forms, such as the Insurance Services Office (ISO) businessowners policy, already have a duration limit,⁴⁰ but this language likely will become more common in future forms along with business interruption sublimits. The role that government backstops might play for business interruption losses in the post-pandemic world is already under discussion.

One Post-Pandemic Approach: Parametric Insurance

One model being considered for covering catastrophic risks that could receive more attention and use is parametric insurance.⁴¹ Traditional insurance pays proceeds based on the amount of the loss as determined in a claims adjustment process. In contrast, parametric insurance pays out when a predefined event occurs and it meets an objective triggering standard—essentially, an index. The index-based trigger is a metric beyond the insured’s control, so moral hazard will not come into play (as can happen, for example, if the insured under an event cancellation policy makes the decision to cancel).⁴² To illustrate, parametric hurricane insurance pays when a specified wind speed is reached in a particular area; parametric flood insurance pays when floodwaters reach a certain height; and parametric business interruption insurance pays when the number of infections, hospitalizations, or deaths in a particular geographic location in which the insured’s assets are located meet designated thresholds.

The insurer’s exposure is limited through an attachment point, which defines when the coverage begins, and through caps that limit the maximum exposure. By using large data sets, the trigger can be very granular—for example, wind speeds, flood depths, and hospitalizations can be measured locale by locale, which enables proceeds to be targeted to the areas of greatest projected loss.

With parametric insurance, a risk exists that the insured will suffer damage before the coverage is triggered (this is called “basis risk”); thus, traditional coverage is still necessary for losses suffered before parametric coverage applies, but the parametric layer can be coordinated with a traditional product layer.

Integration of Insurance with Domestic and Global Preparedness

Unfortunately, pandemics are not the only systemic risk facing our planet. Global war has long been understood as the epitome of a systemic risk—hence, the massive investments in defense and diplomacy to avoid it. Megadisasters, such as an eruption of a supervolcano (like the Yellowstone Caldera) or an asteroid strike, are potential extinction events and thus fall within this category. (Fortunately, the odds of these extinction events in a human lifetime are comfortingly infinitesimal, but the consequences are so devastating that they are nevertheless “high risk” events.) Climate change has now entered the discussion as a systemic risk, as the planet may have passed a tipping point where global evacuation of coastlines due to rising sea levels may be necessary within a generation or two. Cyberterrorism directed at critical infrastructure, such as energy, financial systems, and supply chains (including food and water), now falls within the realm of systemic risk. In fact, the cybersecurity landscape is changing so quickly that individuals, firms, governments, and the insurance industry are struggling with their risk management efforts. The pandemic is a vivid reminder that with respect to all these perils, a total mismatch exists between likely economic losses and the capacity of insurers—and perhaps governments as the insurers of last resort—to take on the risk.

Because the consequences of systemic risks are so massive, strategies to deal with them must be varied, interdependent, and coordinated. After the U.S. experienced the tragic lack of preparedness for Hurricane Katrina, the U.S. government attempted to articulate a cohesive domestic preparedness plan;⁴³ but its limitations became apparent during COVID-19, when impotent federal and uncoordinated state responses squandered opportunities to better contain the virus.⁴⁴ It is likely that Congress and the Biden administration will return to this plan and attempt to improve readiness for future calamities. But systemic risk has global implications, which makes a comprehensive global preparedness framework necessary.⁴⁵

Insurance can and will be an important part of this framework. Partial coverage of business continuity risk in private markets with supplemental government insurance commitments is an example of ex ante planning to mitigate financial loss. When proceeds are paid, insurance aids the recovery mission. Insurers’ risk management expertise will be useful to some extent to help businesses understand steps that they can take to reduce pandemic risk, meet safe distancing requirements, minimize losses during a pandemic, and safely expedite resumption of business activities. The possibility that insurers’ claims processing systems could be deployed to move assistance and stimulus funds to businesses that suffer losses should not be overlooked.

Conclusion

In 2021, our focus must be on getting through the COVID-19 tunnel and emerging safely on the other side. The total costs and losses of this pandemic are unknown and still growing, but we will eventually exit this tunnel.

History and science, however, teach us that pandemics recur; that the most lethal and virulent have the potential to disrupt civilizations and change the course of history;⁴⁶ and that growing population densities and ease of global movement are increasing the pandemic risk,⁴⁷ even as science, technology, and innovation increase the ability of humankind to prevent, contain, and treat pandemics.⁴⁸ Putting aside the question of whether the lessons of the 1918 influenza pandemic were ever learned, it is incumbent that we learn the lessons of the 2020 coronavirus pandemic and create a comprehensive framework, including insurance, to better prepare the world for whatever pandemics—and other manifestations of systemic risks—await us in the future.⁴⁹

Notes

1. Covid Map: Coronavirus Cases, Deaths, Vaccinations by Country, BBC News (July 1, 2021), https://www.bbc.com/news/world-51235105.

2. World Economic Outlook Update: Policy Support and Vaccines Expected to Lift Activity, Int’l Monetary Fund 5 (Jan. 2021) [hereinafter IMF Report], https://www.imf.org/en/Publications/WEO/Issues/2021/01/26/2021-world-economic-outlook-update.

3. Covid World Map: Which Countries Have the Most Coronavirus Vaccinations, Cases and Deaths?, Guardian (June 11, 2021), https://www.theguardian.com/world/2021/jun/11/covid-world-map-which-countries-have-the-most-coronavirus-vaccinations-cases-and-deaths (reporting the U.S. having over 33.6 million cases and 604,714 deaths).

4. Tracking the COVID-19 Recession’s Effects on Food, Housing, and Employment Hardships, Ctr. on Budget & Pol’y Priorities (June 16, 2021), https://www.cbpp.org/research/poverty-and-inequality/tracking-the-covid-19-recessions-effects-on-food-housing-and.

5. Housing Insecurity and the COVID-19 Pandemic, Consumer Fin. Prot. Bureau (Mar. 1, 2021), https://www.consumerfinance.gov/data-research/research-reports/housing-insecurity-and-the-covid-19-pandemic. The 8.8 million renters in this figure represent 18.1 percent of the nation’s renters.

6. COVID Money Tracker, Comm. for a Responsible Fed. Budget, https://www.covidmoneytracker.org (last updated June 21, 2021). This figure includes administrative, legislative, and Federal Reserve actions and counts all allowed funds (as distinct from disbursed and committed funds).

7. See, e.g., Ferdia Byrne et al., Making Sense of Solvency, Capital and COVID-19 for the Insurance Sector, KPMG, https://home.kpmg/xx/en/home/insights/2020/04/covid-19-solvency-capital-and-the-insurance-sector.html (last visited July 1, 2021); Divya Kirti & Mu Yang Shin, The Impact of COVID-19 on Insurers, VoxEU & CEPR (June 20, 2020), https://voxeu.org/article/impact-covid-19-insurers.

8. See, e.g., Q4 2020 Market Report, EPIC Ins. Brokers & Consultants (Feb. 19, 2021), https://epicbrokers.com/insights/q4-2020-market-report.

9. See, e.g., John Egan, Scrutiny Intensifies over Auto Insurance Pandemic Refunds, Forbes Advisor (Apr. 9, 2021), https://www.forbes.com/advisor/car-insurance/pandemic-refunds-criticized.

10. See Motor Vehicle Deaths in 2020 Estimated to Be Highest in 13 Years, Despite Dramatic Drops in Miles Driven, Nat’l Safety Council (Mar. 4, 2021), https://www.nsc.org/newsroom/motor-vehicle-deaths-2020-estimated-to-be-highest.

11. See, e.g., Kai-Uwe Schanz et al., Geneva Ass’n, An Investigation into the Insurability of Pandemic Risk 22 (2020), https://www.genevaassociation.org/sites/default/files/research-topics-document-type/pdf_public/insurability_report_web.pdf; Timothy F. Harris et al., Did COVID-19 Change Life Insurance Offerings? (Nat’l Bureau of Econ. Rsch., Working Paper No. 28172, Dec. 2020), https://www.nber.org/system/files/working_papers/w28172/w28172.pdf.

12. Schanz et al., supra note 11, at 23.

13. See Daniel McDermott et al., How Has the Pandemic Affected Health Coverage in the U.S.?, KFF (Dec. 9, 2020), https://www.kff.org/policy-watch/how-has-the-pandemic-affected-health-coverage-in-the-u-s.

14. See Craig F. Stanovich, The Coronavirus and the CGL Policy, IRMI Expert Comment. (June 2020), https://www.irmi.com/articles/expert-commentary/coronavirus-and-the-cgl-policy.

15. See Lowell Pearson et al., 50-State Update on COVID-19 Business Liability Protections, Husch Blackwell (Mar. 18, 2021), https://www.huschblackwell.com/newsandinsights/50-state-update-on-covid-19-business-liability-protections.

16. See, e.g., Alicja Grzadkowska, COVID-19 “Hastens the Pace” of Hardening Market in D&O, Ins. Bus. Am. (Aug. 13, 2020), https://www.insurancebusinessmag.com/us/news/professional-liability/covid19-hastens-the-pace-of-hardening-market-in-dando-230680.aspx; Jeff Hirsch, D&O Insurance Pricing Trends 2021, Founder Shield (Mar. 23, 2021), https://foundershield.com/blog/do-insurance-pricing-trends-2021.

17. See, e.g., Andrew G. Simpson, 2020 Could Make 2021 the Year of Insurance Agency E&O Lawsuits, Ins. J. (Jan. 21, 2021), https://www.insurancejournal.com/news/national/2021/01/21/598096.htm.

18. See Josh Cunningham, COVID-19: Workers’ Compensation, Nat’l Conf. of State Legislatures (Dec. 9, 2020), https://www.ncsl.org/research/labor-and-employment/covid-19-workers-compensation.aspx.

19. See Andrew G. Simpson, It Could Have Been Worse. An Update on COVID-19 Impact on Workers’ Compensation, Ins. J. (Feb. 9, 2021), https://www.insurancejournal.com/news/national/2021/02/09/600507.htm.

20. For further discussion of business interruption coverage in the U.S., see Robert H. Jerry, II, Reflections on COVID-19, Insurance, Business Interruption, Systemic Risk, and the Future, 110 Revista de la Facultad de Derecho [J. Faculty L.] 1 (2020), https://ssrn.com/abstract=3775591.

21. See, e.g., Dave Sebastian, Caesars Sues Insurance Carriers, Saying They Declined to Cover $2 Billion-Plus of Losses, Wall. St. J. (Mar. 22, 2021), https://www.wsj.com/articles/caesars-sues-insurance-carriers-saying-they-declined-to-cover-2-billion-plus-of-losses-11616443725; Matt Sheehan, Major League Baseball Sues Insurers over Pandemic BI Insurance Losses, Reins. News (Dec. 8, 2020), https://www.reinsurancene.ws/major-league-baseball-sues-insurers-over-pandemic-bi-losses.

22. See Lorelie S. Masters & Latosha M. Ellis, Event Cancellation Insurance Issues during a Pandemic, Nat’l L. Rev. (Aug. 10, 2020), https://www.natlawreview.com/article/event-cancellation-insurance-issues-during-pandemic.

23. See Alwyn Scott, Insurers Rewrite Business Policies after Pandemic Legal Tussles, Reuters (Mar. 5, 2021), https://www.reuters.com/article/us-insurance-businessinterruption/insurers-rewrite-business-policies-after-pandemic-legal-tussles-idUSKBN2AX139.

24. Thomas F. Tarbell, The Effect of Influenza on Insurance, 1919 NAIC Proc. 302.

25. See Pandemics That Changed History, History.com (Dec. 21, 2020), https://www.history.com/topics/middle-ages/pandemics-timeline.

26. See Owen Jarus, 20 of the Worst Epidemics and Pandemics in History, Live Sci. (Mar. 20, 2020), https://www.livescience.com/worst-epidemics-and-pandemics-in-history.html.

27. See, e.g., ISO Circular LI-CF-2006-175, New Endorsements Filed to Address Exclusion of Loss Due to Virus or Bacteria (July 6, 2006), https://www.propertyinsurancecoveragelaw.com/wp-includes/ms-files.php?file=2020/03/ISO-Circular-LI-CF-2006-175-Virus.pdf.

28. Autonomous, Insurance: Scaling the Industry Non-Life Loss (2020) (quoted in Andreas Richter & Thomas C. Wilson, Covid-19: Implications for Insurer Risk Management and the Insurability of Pandemic Risk, 45 Geneva Risk & Ins. Rev. 171, 191 (2020), https://link.springer.com/article/10.1057/s10713-020-00054-z).

29. See Robert H. Jerry, II, Managing Hurricane (and Other Natural Disaster) Risk, 6 Tex. A&M L. Rev. 391, 395–96 n.17 (2019).

30. See Nat’l Comm’n on Terrorist Attacks upon the United States, The 9/11 Commission Report 339 (2004).

31. Normalcy Bias, Wikipedia, https://en.wikipedia.org/wiki/Normalcy_bias (last updated June 29, 2021).

32. Aaida Mamuji & David Etkin, Disaster Risk Analysis Part 2: The Systemic Underestimation of Risk, 16 J. Homeland Sec. & Emergency Mgmt. 1, 2 (2019), https://www.researchgate.net/publication/330739905_Disaster_Risk_Analysis_Part_2_The_Systemic_Underestimation_of_Risk.

33. See, e.g., What Is Foresight?, OECD: Strategic Foresight, https://www.oecd.org/strategic-foresight/whatisforesight (last visited July 1, 2021); Bruno Jacobsen & Irmeli Hirvensalo, What Is Strategic Foresight?, Futures Platform: Future Proof (May 7, 2019), https://www.futuresplatform.com/blog/what-strategic-foresight.

34. J. Peter Scoblic, We Can’t Prevent Tomorrow’s Catastrophes Unless We Imagine Them Today, Wash. Post (Mar. 18, 2021), https://www.washingtonpost.com/outlook/2021/03/18/future-forecasting-strategic-planning.

35. See, e.g., Political Risk, Violence, War and Terrorism Insurance, Clements Worldwide, https://www.clements.com/insurance-solutions/your-organization/commercial-solutions/political-risks-political-violence-war-and-terrorism-insurance-coverage (last visited July 1, 2021) (describing products offered); War & Terrorism Insurance, Lockton, https://www.lockton.com/war-terrorism (last visited July 1, 2021) (describing products offered).

36. See Steven L. Schwarcz, Insuring the “Uninsurable”: Catastrophe Bonds, Pandemics, and Risk Securitization, 99 Wash. U. L. Rev. (forthcoming 2021), https://ssrn.com/abstract=3712534.

37. See IMF Report, supra note 2, at 5.

38. See Schanz et al., supra note 11, at 9 n.6 (extending from Willis Towers Watson 2020 estimate of $10–$20 billion business interruption coverage in the U.S.).

39. Id. at 9. These numbers have been revised to reflect an updated World Bank estimate of global GDP loss.

40. See Ins. Servs. Off., Inc. (ISO), Businessowners Coverage Form BP 00 03 07 13, § I.A.5.f. (limiting payment for actual loss of “business income” to the “period of restoration” occurring within “12 consecutive months after the date of direct physical loss or damage”).

41. See, e.g., Joshua B. Horton, Parametric Insurance as an Alternative to Liability for Compensating Climate Harms, 12 Carbon & Climate L. Rev. 285 (2018), https://keith.seas.harvard.edu/publications/parametric-insurance-alternative-liability-compensating-climate-harms; Russ Banham, This Insurance Would Have Helped in Coronavirus Crisis but Nobody Bought It, Ins. J. (Apr. 3, 2020), https://www.insurancejournal.com/news/national/2020/04/03/563224.htm; Kate Stillwell, Claims Considerations for Parametric Insurance, NU PropertyCasualty360 (Jan. 13, 2021), https://www.propertycasualty360.com/2021/01/13/claims-considerations-for-parametric-insurance.

42. It has been suggested that the reason why the Wimbledon tennis and British Open golf tournaments were canceled, whereas the French Open and U.S. Open tennis tournaments were postponed, is that the sponsors of Wimbledon and the British Open had purchased event cancellation insurance, and the sponsors of the French Open and U.S. Open had not. See, e.g., Keith Dunlap, Why Were Wimbledon, British Open Canceled Instead of Postponed?, KSAT.com (July 20, 2020), https://www.ksat.com/sports/2020/07/20/why-were-wimbledon-british-open-canceled-instead-of-postponed.

43. See Post-Katrina Emergency Management Reform Act of 2006, 6 U.S.C. §§ 701–811 (reforming FEMA and articulating five missions in disaster response); Jared T. Brown, Cong. Rsch. Serv., R42073, Presidential Policy Directive 8 and the National Preparedness System: Background and Issues for Congress (2011) (discussing 2011 Obama directive linking the five missions to create a “secure and resilient nation”).

44. See Lawrence Wright, The Plague Year: The Mistakes and the Struggles Behind America’s Coronavirus Tragedy, New Yorker (Dec. 28, 2020), https://www.newyorker.com/magazine/2021/01/04/the-plague-year.

45. See, e.g., Lawrence O. Gostin, The Great Coronavirus Pandemic of 2020—7 Critical Lessons, JAMA Health F. (Aug. 13, 2020), https://jamanetwork.com/channels/health-forum/fullarticle/2769600.

46. See, e.g., Damir Huremovic, Brief History of Pandemics (Pandemics Throughout History), in Psychiatry of Pandemics (Damir Huremovic ed., 2019), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7123574; Pandemics That Changed History, supra note 25.

47. See, e.g., Toshiko Kaneda & Charlotte Greenbaum, How Demographic Changes Make Us More Vulnerable to Pandemics Like the Coronavirus, Population Reference Bureau (Apr. 13, 2020), https://www.prb.org/how-demographic-changes-make-us-more-vulnerable-to-pandemics-like-the-coronavirus.

48. See, e.g., Barbara J. Jester et al., 100 Years of Medical Countermeasures and Pandemic Influenza Preparedness, 108 Am. J. Pub. Health 1469 (2018), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6187768 (discussing accomplishments in pandemic response and treatment since 1918).

49. See Peter Sands et al., World Econ. F., Outbreak Readiness and Business Impact: Protecting Lives and Livelihoods across the Global Economy 6 (2019), https://www.weforum.org/reports/outbreak-readiness-and-business-impact (“On the 100th anniversary of the 1918 influenza pandemic, it is tempting to believe the world has seen the worst epidemics. However, with increasing trade, travel, population density, human displacement, migration and deforestation, as well as climate change, a new era of the risk of epidemics has begun. The number and diversity of epidemic events has been increasing over the past 30 years, a trend that is only expected to intensify.”).