 Learning from COVID-19: A catastrophe mortality bond solution in the post-pandemic eraZe Chen, Hong Li, Yu Mao and Kenneth Q. Zhou Insurance: Mathematics and Economics, 2025, vol. 123, issue C Abstract: The development of robust financial instruments to mitigate pandemic-induced mortality risks has become increasingly critical, particularly for the insurance sector, in the aftermath of COVID-19. This paper introduces a novel pandemic bond designed to alleviate the financial burden on life insurers and reinsurers exposed to pandemic-related mortality risks. The bond's payouts are linked to publicly available pandemic data, enhancing transparency, ensuring timely payments, and mitigating the risks of information asymmetry and moral hazard. A stochastic Susceptible-Infected-Recovered-Deceased (SIRD) model is developed to evaluate the pricing and hedging performance of the PAN bond. Numerical analysis based on U.S. COVID-19 data illustrates the proposed SIRD model's effectiveness in generating reliable probabilistic forecasts of excess mortality and demonstrates the bond's potential as an effective hedge against pandemic-induced mortality risks. Keywords: Pandemic mortality risk; SIRD model; Catastrophe bond; Risk management; COVID-19 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:123:y:2025:i:c:s0167668725000605 DOI: 10.1016/j.insmatheco.2025.103113 Access Statistics for this article Insurance: Mathematics and Economics is currently edited by R. Kaas, Hansjoerg Albrecher, M. J. Goovaerts and E. S. W. Shiu More articles in Insurance: Mathematics and Economics from Elsevier |
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