Navigating the COVID-19 risk landscape

If 2020 was the year of the pandemic, then 2021 will be the year of the vaccine. The vaccination of millions of ‘at risk’ people against COVID-19 will finally place us firmly on the road to recovery. But this recovery will not be linear. As countries around the world go back into lockdown, we can expect many more bumps in the road.

The potential for further business disruption will remain high throughout 2021 as further spikes in infection rates and further mutations in the virus occur. Most business leaders now have well developed lockdown survival strategies in place. But it is critical that business strategy starts to look beyond business continuity and anticipate the emerging business risks associated with life beyond COVID-19. And from an insurance perspective, COVID-19 will carry the potential for serious consequences, compounded by a degree of uncertainty, for some time.

During the first phase of the pandemic, business leaders quickly adapted their operating models with a rapid shift towards digital transformation and remote ‘working from home’. This helped to maintain some semblance of ‘business as usual’. But these responses also gave rise to new operating risks. Cyber threats have grown rapidly in a world where digitisation has accelerated, with more business operations and client data moving online. At the same time, regulators take an increasingly dim view of firms which fail to protect data and the integrity of their IT systems. GDPR upped the ante in 2018 but it represents the thin end of the regulatory wedge. Yet many companies, notably small and medium-sized enterprises, still do not have clear cyber risk strategies in place. This leaves businesses dangerously exposed with a minority of organisations being insured against cyber risks. COVID-19 has accelerated the need for a greater focus on cybersecurity.

Likewise, health and safety ‘at work’ has changed beyond recognition. With as many as two-thirds of people working from home during the lockdown, our research (page 20-27) reveals that nearly half of home workers (48%) reported having aches and pains because of their new working patterns. Only a small minority reported having been supplied with ergonomic office equipment by their employers. Workers are also feeling other effects of the long-term lockdown with 47% finding it harder to switch off and 43% of us finding it harder to sleep at night. These findings point to work-related mental and physical stress leading to greater sickness absence and lost business potential resulting in a potential new wave of employer liabilities.

The long-term public health impacts of COVID-19 could bring yet further liabilities. The failure to provide safe working environments – particularly for those who cannot work from home – raises the threat of workplace COVID-19 transmissions and the added unknown risks associated with so-called ‘Long COVID’. Long COVID is thought to develop in up to one-in-ten COVID-19 cases. With nearly 90 million cases globally, that equates to over 2.1 million Long COVID cases in the US, 800,000 in Brazil and around 300,000 cases in the UK.

Anticipating future trends and behavioural patterns will become increasingly important in business planning. The role of strategic scenario risk planning must grow, for all businesses, to include the application of data. Pursuing a more forward-looking, proactive strategy towards risk will improve business resilience when, not if, the next crisis strikes.

Insurers must continue to respond as well, reviewing product features across a wide range of business lines to reflect the changing landscape of COVID-19 related risks, and the ongoing complexity and interconnectivity of the exposure. Further, pandemics have almost certainly joined the list of other systemic risks, like terrorism and secondary perils from climate change such as flooding. Such risks will redefine the contract between the public and private sector. It cannot be assumed that the industry will be able to bear the risk of future pandemics on its own.