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Avian FluHow Big A Menace?

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One major reinsurer warns that the sky could fall

Flu season may take on a whole new meaning if a virulent avian flu virus jumps over to humans and spreads worldwide from Asia to the United States and beyond, according to a risk management expert at ING Re, Minneapolis.

“I think this is a very real risk,” says Eric Rasmussen, ING Re’s vice president of risk management.

In fact, ING Re is putting stock in data that it says the U.S. Department of Health and Human Services has developed that estimates 1.76 million Americans could die from the avian flu virus known as H5N1. Of that total, according to data provided by ING Re, 659,889 are under age 5 or older than age 65. A total of 667,774 fall in the 5-34 age group, and 436,001 fall in the 35-65 age group (see chart).

That interpolation looks at the number of Americans predicted to be infected and the number killed by the 1918 pandemic and applies those numbers to today’s population, according to ING Re.

The 1918 Spanish flu pandemic killed 20 million to 50 million people worldwide. Predictions are that the avian flu has the potential to kill 180 million to 360 million people worldwide, according to an article written in May 2005 in The New England Journal of Medicine by leading expert, Michael T. Osterholm, Ph.D.

Osterholm has worked with ING Re on the issue.

Discussions with experts suggest that it is a matter of “when and not if,” Rasmussen says. What is less certain is the timing, which could be this fall, next fall or in 2007 or beyond, he adds.

“Worldwide, insurers should be concerned” over a significant spike in both mortality and morbidity, he says.

And a pandemic would not only impact mortality and morbidity but also could cause a disruption to business such as the effect that was felt when SARS spread beyond Asia in 2003. If a pandemic occurs, it might even impact commuter and work travel, Rasmussen says.

What may not be of assistance in mitigating direct writers’ risks, according to Rasmussen, are catastrophe coverage that would not cover a single event and abnormal mortality stop-loss programs. These programs would be more suitable to this kind of risk and are in reinsurers’ product portfolios but may have pretty restrictive terms if avian flu becomes a pandemic, he says.

What the industry can do, he continues, is to persuade government health officials to improve vaccine technology. The current use of egg vaccine technology is like using a Tandy PC computer from 1978, he says.

If the avian virus does perch in the U.S., Rasmussen says he believes it will be a widespread problem but will be more problematic in urban areas.

And while other viruses such as Ebola pose a potential risk to humans, he says the H5N1 strain is of most concern. “Worldwide, insurers should be concerned.”

Several other reinsurers and direct writers contacted by National Underwriter declined to be interviewed for this article.

Others say that while they are watching the potential spread to humans, it has not yet become an immediate issue that faces the industry.

“Avian flu is on our radar screen, but it has yet to become an underwriting issue,” says Dr. Robert Profumo, medical director at Transamerica Reinsurance, Charlotte, N.C.

Although Profumo says that “evolving health care issues always are important in the selection and pricing of mortality risk,” he also notes that the low incidence of disease and Transamerica’s international locations have not left it vulnerable to avian flu, SARS or Ebola.

“The recent case report of human-to-human transmission of the avian flu virus–an influenza A variant–is of concern to health officials in Southeast Asia,” he says. “Continued surveillance of this disease will alert us to the need to alter our current underwriting practices.”

What are of concern, Profumo notes, are Hepatitis B and C. “These are endemic diseases which have a significant impact on the company’s business practices. Reinsurers have known about hepatitis risks for some time and they are reflected in current pricing.”

Direct writers including Hartford Life Insurance Company, Hartford, Conn.; Mutual of Omaha Insurance Company, Omaha, Neb.; New York Life Insurance Company, New York; and Prudential Insurance Company of North America, Newark, N.J., say they are aware of the virus. However, they add that while they are monitoring any potential spread of avian flu, they have not at this point instituted advance plans. If the situation changes, they say, the impact of avian flu will be revisited.

New York Life spokesperson Terri Marchon says that at this point avian flu is a blip on the screen that is being watched.

If it were to become an issue, it would be similar to the situation that existed when AIDS first broke out, says Stephen Bloom, vice president and chief underwriter with New York Life. An insurer would have to determine the mortality impact on its business and the resulting impact on its bottom line, he adds. If reinsurance is being used, that new mortality experience would then be reflected in negotiations with reinsurers, Bloom explains. The price rather than the availability of reinsurance probably would be affected, he adds. In New York Life’s case, there is a sizeable retention limit, according to Bloom.

Direct writers say they are watching how the flu spreads

Flag–Taking Its Toll

Other Pandemics

Black Plague

==Killed 25 million people, a third of Europe’s population, in 5 years between 1347 and 1352.

1918 ‘Spanish’ Flu

==20 to 50 million killed worldwide, more than the 8.5 million fatalities in World War I.

==Hit 20- to 40-year-olds hardest.

==Infected 28% of all Americans and killed an estimated 675,000.

==25% of the world population affected.

==October 1918 becomes the deadliest month in U.S. history with 195,000 dying from influenza.

SARS (Severe Acute Respiratory Syndrome)

==8,098 people worldwide become sick from SARS between Nov. 2002 and July 2003.

==774 die from it during that period.

==8 people in the U.S. come down with SARS during 2003 outbreak. No U.S. deaths reported.

==in 2004, 8 possible new cases reported in China, with 1 death.


==From 1976 through 2002, 1,643 cases reported.

==Annual percent of fatalities of those cases range from 0-100% in those years with an average of 49.4%.

==Cases reported in Africa.


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