In western North America, a recent epidemic of mountain pine beetle (Dendroctonus ponderosae) caused widespread forest mortality. This outbreak was in part due to the changing climate, and damage from pests and diseases is expected to increase in the future. To learn from this event, we used a historical retrospective approach to evaluate business-as-usual and alternative management strategies effects on tree species diversity. The insurance hypothesis proposed that ecosystems with greater species diversity will have greater productivity due to the buffering effect against natural disturbances. Therefore, we hypothesized that management strategies to increase diversity before the beetle outbreak could result in higher growing stocks, harvest rates, and net present value. The assessment was based on simulation modelling of a 1.1 million ha landscape in British Columbia, Canada for 1980–2060. We applied different strategies to affect diversity: harvest more of the most dominant tree species, planting more diverse species, and increase natural regeneration. The most aggressive strategy resulted in higher diversity and growing stocks, higher harvest rates, and higher, more consistent net revenue over time than the business-as-usual strategy. However, the strategy that only employed a diversity of planting negatively affected those indicators. Thus, we have identified limitations to what management strategies may be able to achieve. Sensitivity analyses of species productivity and log price indicated a high level of robustness in the results. Our study showed that reducing forest health risks may be economically viable.