Product Family

Are current known losses just the tip of the iceberg?


Secondary perils of natural disasters (tsunamis and floods) have challenged insurance for ages. What challenges will result from a global pandemic?

On March 11, 2011, an earthquake hit off the Pacific Coast of Japan’s Tohoku region. The 9.0-magnitude quake set off a devastating tsunami that caused the meltdown of three nuclear reactors at the Fukushima Daiichi Nuclear Power Plan. The total estimated damages from the quake and tsunami: $235 billion.

Until this year, that is. Nearly ten years to the day later, that same earthquake caused yet another series of aftershocks struck – one in February 2021 and another in March 2021. The 7.1-magnitude and 6.9-magnitude quakes were one of thirteen detected aftershocks that have occurred since the original quake.

So far in the COVID-19 pandemic, the direct economic costs are estimated at $11 trillion. However, future costs from the long-term impact of the global pandemic is expected to add another $10 trillion in future earnings losses.

That figure skyrockets when you factor in the cost of lost wages, unemployment claims, insurance claims, and loss of productivity. In the US alone, these are estimated to cost this country $16 trillion, or approximately 90% of the annual gross domestic product of the US.

Then there are the secondary costs, such as ongoing physical ailments, mental health issues, PTSD, anxiety, depression, suicide, the impact on families, and long-haul COVID survivor symptoms. As we learn more about COVID-19 and its side effects, we learn more about what our workers and their families could be facing for years to come.

Possibly no event in recent history has presented as much opportunity to discuss the unknowns of the current pandemic. Nearly daily, we hear reports about how much we did not know about the virus and the illness it causes. We've learned more, developed vaccines, rapidly adapted our businesses. Now is the time to check our assumptions and look for what lies ahead.

Physical & Mental Health
Within months of the initial cases of COVID-19 illness, survivors began reporting that they still were not back to normal. Tens thousands of people in the United States have lingering illness, including children. People with long COVID, or “long-haulers” exhibit the symptoms of fatigue, body aches, shortness of breath, difficulty concentrating, headache, and difficulties sleeping long after the initial infection is gone. There are an estimated 10-20% of Americans who are considered to be COVID long-haulers.

Mental issues can also impact a wider swath of the workforce: workers who have contracted the disease, or who have had to care for or have lost someone to the virus; healthcare workers; the newly unemployed; remote workers who are overworked; and nearly any worker who is isolated and experiencing anxiety or depression as a result.

Many companies recognize the anxiety their employees are facing and have increased or added mental health services. Additionally, some companies close the offices on select days or added some floating holidays to allow employees some time off to decompress.

Managers also realize they need new tools to be able to recognize signs of stress in employees and deploy strategies to adequately respond. Too often, companies neglect this kind of training and leaders are not equipped with the right skills. With employees being our most valued resource, in addition to succession planning, teams need to be resilient and have the ability for individuals or even other teams, step in when required.

As workforces became dispersed, innovation took a sizable hit

Take-home COVID Cases
One undefined area of concern is what’s known as “take-home COVID” – when another household member is believed to have contracted their infection from a worker who contracted it at the place of business. The workers compensation system makes it difficult for workers to sue for an illness such as COVID-19, but when the worker’s illness is not the subject of the claim, the business could be vulnerable.

While there does need to be a strong causal chain established, a business that fails to adopt adequate safety measures could be found negligent. The best defense, then would be to establish proper protocol and safety procedures. Also, documenting all safety controls goes far in showing the steps the business is taking to ensure they fulfill their duty of care.

Productivity & Innovation
Another hit to employees that organizations may already be focused on – productivity. While prior studies have shown that 72% of employers report that their remote employees are more productive than when in the office, not every employee benefits from remote work. While productivity for many employees did increase by 5-8%, it did so mostly for those employees who were high performers at work already. Thanks to poor collaboration and inefficient work practices, most organizations saw a 2-3% reduction in productivity.

Part of the reason could be longer working hours and attending more meetings. The average workday increased by 8.2% for 3.1 million people in 16 cities.

The right employees in the wrong setting, even if work hours remain the same, can hamper productivity. As workforces became dispersed, innovation took a sizable hit – 40% of executives surveyed across Europe believed their companies are innovative, whereas last year, 56% of those executives felt that way.

While that could be a sign that companies were more concerned with paring back to the basics at the onset of the pandemic, it could also illustrate the need for companies to invest in the right tools for collaboration. Likewise, companies should be investing in training employees to work well remotely, which is not an inherent skill.

There is no one answer, or even right answer on the mix of remote versus in-person workforce. There are too many factors about the nature of the work and employees to consider. However, most research on the topic shows choice often leads to the best in productivity and employee satisfaction. If remote work is to continue for any organization, investing in training – particularly training in how to collaborate and innovate in a remote setting – is wise to consider.

The Shifting Talent Pool
How the pandemic has impacted an organization’s diverse talent pool is another big concern. There is a risk that the slow return of women to the workforce may further widen the underrepresentation of women in managerial and corporate leadership roles for years to follow.

However, remote work options also create opportunities. The expansion of the talent pool from local to national, and even international, candidates can make it easier to obtain top talent. Research has shown remote workers are happier on their jobs, 29% more often than their in-office colleagues.

It’s important for organizations to monitor their talent and look for any imbalances in diversity and inclusion goals. Consider what female employees may need to allow them to return to work – either in-person or remotely. A closer look at how an organization can best deploy its talent pool in a way that fits their personalities and needs can improve both retention and productivity.

Moving Forward as a Team
From ongoing health concerns to the long-term impact of the pandemic on the workforce, organizations have faced plenty of challenges since March 2020. While companies were able to adapt quickly to the new landscape, few were prepared for the pandemic’s secondary impacts.

It is important to have a heightened awareness of temporary changes to the liability landscape as economic activity returns to “normal”. For example, Automobile Liability is expected to worsen before resuming normalcy. Traffic densities were abnormally low during the COVID lockdown. As more people return to work, traffic density will increase but with many drivers that may be ”rusty” from not having driven as frequently. We anticipate commercial auto accident frequency will increase above pre-COVID norms temporarily until driving skill normalizes.

Knowing where the problem areas lie can help any organization prepare and respond. We at AXA XL know risk managers need the right information to get the needed attention to such efforts. We start with expected loss quantification, focus on reasonable reduction measures to reduce occurrence probability, and impact severity, and follow with a plan to enact when needed for quick and cost-effective recovery.

Secondary perils of COVID-19 are real. Businesses could feel their impacts for the next decade. With attention and preparation, however, those impacts can be noticeably reduced, allowing a company to grow and thrive despite the ongoing challenges.

Additional Information
Watch the on-demand webinar Secondary Perils of COVID-19 to learn more about this topic. Visit to access our entire webinar and podcast library. For information about our casualty insurance products, visit


About the Authors

Sheri Wilbanks is the Head of GRM P&C Climate & Sustainability, AXA Group, and Chris Kopser is the President of AXA XL's Primary Casualty, Americas division.


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