An actuarial model of the economic cost of the first year of a pandemic and the community mobility index

ABSTRACT

The COVID-19 pandemic significantly affected world economics. Thus, to anticipate the possibility of a future pandemic, it is crucial to find a proper way to simulate and estimate the cost of a pandemic, which is critical to the economy and welfare. This paper presents an actuarial Susceptible-Infected-Recovered and Death (SIR-D) multiple-state model that estimates the cost of a pandemic through the Cost-of-Illness (COI) analysis for both individual and regional levels. The model can be used to design financial products anticipating future pandemics. Formulas are constructed for two categories of COI, i.e., direct costs and productivity losses. The COIs are calculated annually and weekly throughout the year 2020. We also build and analyze multiple regression models that picture the relationships between community mobility and the amount of economic burden. We apply the model to studying the USA, India, Indonesia, Canada, Australia, and Taiwan. Indonesia, India, and the USA have the world-largest populations. In addition, Australia and Taiwan were known to apply strict border control, tracking, and quarantine in 2020. The models indicate moderate to high correlations between community mobility and economic burden during the first year of the COVID-19 pandemic. © 2023, ICIC International. All rights reserved.