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Biosecurity Briefing
Pandemic Flu Could Cost $133 Billion in Life Insurance Claims By Onora Lien, January 20, 2006 On January 17, the Insurance Information Institute released Pandemic: Can the Life Insurance Industry Survive the Avian Flu?, a report which estimates the potential impact that a moderate or severe influenza pandemic could have on the U.S. life insurance industry.[1] The report used forecasts from the U.S. Department of Health and Human Services to assess the mortality risk for life insurance companies. Both the moderate and severe forecasts assume that 90 million people would become ill in the United States (30% of the U.S. population). Under the moderate forecast, 209,000 people would die; under the severe forecast 1.9 million people would die. The report estimates that a severe influenza pandemic could result in $54.4 billion in death claims from group life insurance and $78.8 billion in death claims from individual life insurance, for a total of $133.2 billion. The report also estimates that "[u]nder these assumptions, virtually every company's group life claims would surpass premiums, dissolve any policyholder dividends and possibly force them to use some corporate surplus" and that "perhaps five to eight of the 30 leading group life insurance writers might struggle to pay their group life claims."[1] The report notes that its analysis "does not take into account the effect of reinsurance arrangements . . . insurers might have to protect against spiking claims levels. However, virtually all U.S. life reinsurance is provided by 10 companies, all of which also have large books of business in other countries, which might also be affected by a global influenza pandemic."[1] The report concludes that "since the life reinsurance market is highly concentrated and all companies with reinsurance would be seeking reimbursements at the same time, questions about some life reinsurers' ability to pay will arise."[1] In the event of a moderate influenza pandemic, the report estimates that death claims from group life insurance could amount to $11.2 billion, and death claims from individual life insurance could amount to $19.6 billion, for a total of $30.8 billion. References
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