Bird Flu Could Wipe Out Half U.S. Life Insurers
A March 2006 report released by Morgan
Stanley Equity Research, warned life insurers
of a possible outbreak of the H5N1 influenza
virus, or “bird flu” that could
essentially wipe out half of the United
States’ life insurers. Steve Dwyer,
writer for Insure.com, reported
this in his article, “Report: Avian
Flu Pandemic Could Wipe Out Half the Capital
of U.S. Life Insurers.”
Morgan Stanley’s report stresses that
the probability of this actually happening
is “remote,” yet it does provide
a perspective of how U.S. life insurers
would fare if there were a slew of death
claims within a short period of time.
“The seriousness of the situation
is underscored by the fact that Morgan Stanley
has warned that ‘life
insurance stands out as one of the industries
most at risk,’ says Nigel Dally, North
America Life & Annuities analyst for
Morgan Stanley.”
Since December 2003, 105 out of the 186
people infected with this strain of influenza
have died. The world will have to wait to
see if the strain allows person-to-person
transmission, as originally predicted.
While tracking the development of the virus
overseas, many life
insurance companies believe they would
be “insulated” even if the virus
reached U.S. soil.
“Were this to happen, Morgan Stanley
claims that there would be several life
insurance company failures combined
with the need to raise additional capital
by the surviving life insurers. In such
a scenario, there’s no doubt that
government bailouts and outright takeovers
of life insurance companies would occur.”
Still, life
insurance companies remain confident
in their ability to handle all the claims
in the event of a deadly outbreak.
The American Council of Life Insurers (ACLI)
consists of 377 member companies that account
for 91 percent of the life industry's total
U.S. assets. “Jack Dolan, managing
director of media relations for ACLI, assured
that the life industry has ‘reserves
and surplus sufficient to cover all plausible
scenarios involving avian flu.’”
Dolan continued to explain that, “While
life insurers have statutory capital and
surplus of about $250 billion, they are
actually holding some $4.2 trillion in reserves
to pay claims.”
Dolan says that the Morgan Stanley report
“makes good reading” and life
insurers are well aware of the possible
risks associated with the virus.
Containment of the virus is important. Life
insurers are keeping a close watch on the
development of the disease in hopes of it
not reaching the U.S. If it does reach the
U.S. experts want to be prepared and know
how many claims it may affect.
“And the fact remains that many variables
must be considered to be able to determine
the number of people who could catch and
die from the avian flu, the U.S. Department
of Health and Human Services projects that
in a severe flu pandemic similar to the
1918 experience, 1.9 million people in the
U.S. could die.”
There is no way to exactly predict what
will happen if the virus spreads to U.S.
soil. All the life insurers can do is to
prepare for the worst.
