Researchers using “optimistic models” have predicted that an avian influenza pandemic could cause $15 billion to $20 billion in U.S. insured losses.[@@]

That’s the consensus of analysts at Standard and Poor’s, New York.

In a report, S&P analysts say overall worldwide losses of $71 billion to $200 billion could result, with the heaviest impact being on big cities with large transit systems.

The $15 billion to $20 billion figure, based on U.S. Center for Disease Control data, reflects medical advances and containment efforts of the type that restricted Severe Acute Respiratory Syndrome in 2003, S&P says.

If the virus spreads from birds to humans and causes a pandemic, it would cause losses in nearly all insurance sectors: Health, commercial insurance, life, life and property reinsurance and retrocession, S&P analysts say.

Modeling for an influenza pandemic is a challenge, as modern record-keeping began only with the 1918 Spanish Influenza epidemic, which had a worldwide death toll of at least 40 million.

Infection or death rates that rise to or above 1918 levels would impair and weaken insurance companies materially, S&P analysts write. But prevention and treatment have improved considerably since 1918, however, and the analysts say such extreme casualties do not look likely.

Insurers in developed countries are generally well capitalized and have sufficient reserves to cover a significant epidemic, but typical catastrophic reinsurance coverage does little to protect primary companies from the risk of prolonged epidemics, S&P says.

Although an avian flu pandemic is unlikely in a large metropolitan area, those at highest risk if it erupts are in areas with extensive public transportation systems, such as New York, Chicago, Tokyo, Paris and London, S&P says.

A pandemic could last for several months, and insurers with geographic concentrations in such areas might be exposed to an aggregation of losses not fully protected by reinsurance, S&P says.