Event: SARS epidemic, 2003
Location: Hong Kong, China
Economic cost: Hong Kong’s GDP fell by 2.63% in 2003, and it experienced deflation and unemployment, which rose to 8.7% in 2003. Tourism’s value dropped from $36.4bn in 2002 to $29.3bn in 2003.
Description: The epidemic began in Guangdong province in China in November 2002 and arrived in Hong Kong in February 2003. By the time the disease was contained, in July 2003, there had been 1,755 cases in Hong Kong, including 299 deaths.
Damage: The most significant economic impact was on demand, with local consumption and the export of services related to tourism and air travel severely affected, especially after the World Health Organization warned against non-essential trips to Hong Kong. Shops, restaurants, hotels, airlines and cinemas were hit. Sales dropped by up to 50%, and there was a resultant impact on supply chains. Some estimates suggest SARS caused global economic losses of between $30bn and $150bn. Only a small proportion of the losses were indemnified via non-physical damage business interruption policies.
Insight: Following the 2014 Ebola outbreak, the World Bank announced plans to set up a pandemic emergency fund, modelled on similar disaster-related financing mechanisms such as its Pacific Catastrophe Insurance Facility. “Our goal is to work with partners to create a financial instrument that rapidly disburses a large amount of funds within eight hours, not eight months, of an outbreak that meets certain objective criteria,” said World Bank President Jim Yong Kim.
Insurance solutions: The Lloyd's market offers cover in relation to Human pandemic. Examples of this include but are not limited to: Health insurance, travel insurance, workers' compensation, employers' liability, directors' & officers' liability, medical errors and omissions, medical malpractice, business interruption and contingent business interruption (specialty BI policies, eg. hotel/hospitality BI, with pandemic-related triggers), event cancellation and contingency cover.
Image: Hong Kong residents take precautionary measures during the 2003 SARS outbreak (Getty Images)
Sources: Hong Kong Government; “Remarks by World Bank Group President Jim Yong Kim at the Foreign Correspondents Club of Japan”, worldbank.org (2015); S. Knobler et al (eds.): Learning from SARS (2004); World Health Organisation
