We Can Protect the Economy From Pandemics. Why Didn’t We?

“It’s really a 100-year thing,” Nathan Wolfe said. It was 2006, and Wolfe, then a 36-year-old virologist with an unruly nest of curly hair, was sitting across a table from me at a bustling restaurant in Yaoundé, the capital of Cameroon. An epidemiology professor at UCLA, he had been living in West Africa for six years, establishing a research center to identify and study viruses as they crossed over from wild animals into humans.

That night Wolfe told me he was forming a network of research outposts around the globe, in hot spots where potentially devastating viruses were poised to make the jump: Cameroon, where HIV likely passed from chimpanzees into local hunters; the Democratic Republic of Congo, which had seen human outbreaks of monkeypox; Malaysia, home to a 1998 emergence of the Nipah virus; and China, where SARS-CoV had crossed over, likely from bats, in 2002. Wolfe’s hope was that by understanding what he called the “viral chatter” of such places, it would be possible not only to react more quickly to outbreaks but to forecast their arrival and stop them before they spread. The “100-year thing” he was thinking about was a global pandemic, and how history would judge humanity’s efforts to prepare for it. His biggest fear, he said, was a virus unknown to human immune defenses starting a human-to-human transmission chain that would encircle the globe.

As we knocked back Cameroonian beers and talked between sets of a local band, he admitted his project could fail. “It could be that we look at this and it’s stochastic—you can’t predict it,” he said. “Or, it could be that we are on the edge of a paradigm shift.” The ultimate question, Wolfe added, was “Will people look back and say you did a good job responding to epidemics, but you didn’t do anything to prevent them?” The 100-year notion so captivated me that I used it as the last line of a story I wrote in 2007, in this magazine.

Thirteen years later, as the SARS-CoV-2 virus burned across the globe this March, it appeared that the 100-year judgment had arrived. We’d failed both at preventing the exact danger Wolfe had warned us about and at responding when it emerged. He wasn’t the only pandemic Cassandra, of course. Not even close. Scientists, journalists, and public health experts had sounded the alarm for decades, filling journals, government reports, and popular books with their pleas. There were conferences, commissions, hearings, exercises, consortiums. Every few years another near-miss epidemic emerged that cried out for long-term preparation.

But Wolfe was the Cassandra I’d known, and I couldn’t help wondering what it felt like to be living through the pandemic you predicted. We had corresponded a few times since 2007, and I’d followed his career sporadically as he started a company called Metabiota. As best I could gather, he had transferred his original idea of a disease surveillance network into a kind of epidemiological data company.

I dug up his email and wrote to him. “It must be a strange sensation,” I said, “to have been terribly right about something you didn’t want to be right about.”

When he called me the next afternoon, the US had just passed 4,000 cases of Covid-19, and Wolfe sounded beleaguered. “Right now I’m a little bit—what’s the right word for it—overwhelmed,” he said. But he seemed decidedly unenthusiastic about discussing his own prescience. “I’m not interested in Monday morning quarterbacking,” he said. “If you are the person who says the sky is falling and it falls, you definitely feel like saying ‘Why didn’t people listen to me?’ But there are a lot of people saying the sky is falling about other things, and it doesn’t.”

Nor was he particularly interested in casting blame—in offering an I-told-you-so from the intrepid virus hunter. “Plenty of people can speak to that,” he said. “It’s like Good Vibrations: I don’t want to play that anymore. I have a new record.” Now 49, Wolfe had traded the Cameroonian jungle for the conference rooms of Silicon Valley. When I saw him on Zoom, his shoulder-length locks were gone, and his quarantine beard was shot through with gray. But he had the same glow of enthusiasm I remembered. His new preoccupation, he told me, was pandemic insurance.

I’ll confess this didn’t immediately pique my interest. The word insurance evokes in me feelings of tedium and loathing. Like many Americans, my personal interface with the industry has, let’s just say, been less than positive. But then Wolfe began to explain the unexpected direction his career had taken. After years of thinking about epidemics in terms of the symptomatic and the dead, he’d begun considering their economic ramifications. A global pandemic, and the steps we would take to stop it, would mean business closings, layoffs, and mass unemployment. Preparing to face an outbreak, he’d come to believe, required anticipating those impacts.

This was where insurance came in, specifically a kind of pandemic insurance policy—for businesses, and perhaps even for countries—that would pay out as soon as an epidemic reached a certain threshold. In 2015, Metabiota had partnered with German reinsurance giant Munich Re and American insurance brokerage Marsh to develop and sell a policy specifically to guard large businesses against pandemics—to stanch the financial losses and keep them afloat. They’d launched it in mid-2018, a year and a half before the first Covid-19 cases appeared in China.

My sense of tedium evaporated. As Wolfe and I were talking, a total economic lockdown was in place, with millions of jobs disappearing by the week and lines at food pantries stretching by the hour. And here he was saying that they had come up with a kind of financial vaccine for exactly this scenario, released not long before the worst pandemic in a century. It wouldn’t stop the virus, of course, but it could help alleviate some of the misery that flowed from it.

How must those CEOs feel, I wondered aloud, who had the foresight to buy the world’s first pandemic business insurance? What a story they would have to tell.

There was just one problem. “By and large we failed,” Wolfe said. “Not because we didn’t do the models well. We enabled the first business-disruption insurance for pandemics. But nobody bought it.”

I was so stunned I called him up a few days later to ask him again. Did he mean literally nobody bought it?

“As far as I know, nobody bought the policy,” he said.

It was a life insurance quandary that first got Gunther Kraut thinking about pandemics, nearly a decade ago. A mathematician by training, Kraut was working at Munich Re, one of the world’s largest reinsurers. As it sounds, reinsurance is the business of insuring insurers. The local and national insurance companies that you and I buy life or auto coverage from—the Geicos and Allstates of the world—need their own protection against rare but catastrophic events that might create enough claims to bankrupt them. Reinsurance companies provide that backstop on insurance for everything from homes and infrastructure projects to business losses and individual lives. Reinsurance is a staggeringly lucrative endeavor: Munich Re had $56 billion in revenue and $3 billion in profit last year. The market is large enough that its perennial competitor, Swiss Re, took in $49 billion itself.

Kraut, sandy-haired and still slightly boyish-looking at 39, grew up near Munich, where the eponymous company has dominated the economic landscape since its founding in 1880. He talks about the intricacies of underwriting with a friendly patience that implies he has done so countless times before, none of which have dimmed his passion. He gravitated toward math at university, and, he told me, “it’s hard to study mathematics in Munich without ever learning about the existence of reinsurance companies.” After completing his PhD in risk management and insurance at Ludwig-Maximilians University, he took a job as a quantitative analyst in Munich Re’s life insurance division in 2007. “Reinsurance is sometimes called the business of a hundred professions,” he said. “Because you don’t just have mathematicians and lawyers and businessmen. You have former mining engineers. You have former captains who steered ships across the ocean. You have art experts who are specialized in art insurance. It is, if you like, always close to life. Admittedly with a little bit of this negative view on it.”

Munich Re—a company built to absorb the risk of others—had a risk problem of its own: namely, the possibility of a global pandemic. Insurance is essentially the business of quantifying risk and then smoothing it out. But for a worldwide outbreak, the math in its life insurance portfolio looked worrying even to Kraut and his colleagues, who spent their careers pondering the darkest risks. In late 2011, Kraut’s team decided to try to do something about it.

“Let’s take the example of Munich and car insurance,” Kraut told me. “That’s a very, very stable business.” A local company might insure tens of thousands of cars, each with a certain probability of having a small accident. “You can predict very well how much money you will have to pay on the claim settlements, and hence how much premium you will need to collect,” he said. But let’s say that one year there is a freakishly large hailstorm in Bavaria, damaging half the cars in the portfolio. The resulting claims could be an extinction-level event for an insurance company. Such storms may occur statistically only once every three decades—a one-in-30-year event, in risk parlance—but every car insurance company would have to keep enough cash on hand to pay out on claims on half its cars, just in case. “That’s a lot of money you need to put aside for something that happens very rarely,” Kraut said.

Now consider an auto insurer in Paris with the same problem: a fleet of cars, a predictable number of accidents, the threat of a one-in-30-year hailstorm event. Herein lies the mathematical advantage of reinsurance. If Munich Re pledges to cover both companies against freakish hailstorms, “what we can assume with a high chance is that there will be hailstorms in Paris, there will be hailstorms in Munich, but most likely they will not happen in the same year,” Kraut said. That means Munich Re can set aside less