Insurers and other businesses are not prepared for the risk of another influenza pandemic, possibly more severe than the 1918 outbreak that killed an estimated 50-to-100 million people, according to a modeling firm.

There is a 20 percent chance of such an event occurring, according to scenarios modeled by Newark, Calif.-based Risk Management Solutions, which said it has completed a probabilistic model for assessing the risk of influenza pandemics across multiple countries.

RMS said earlier studies have illustrated the effects of various pandemic scenarios, most commonly a repeat of the 1918 influenza pandemic that had a mortality level of 67 percent in the United States and even more severe effects in other countries.

Those estimates, RMS said, put the total death toll in the United States at between 500,000 and 675,000, with 28 percent of the American population infected.

The company warned that an analysis of the virology and epidemiological science shows that more severe pandemics are possible.

According to RMS, a probabilistic estimation of the characteristics incorporating those of the H5N1 virus, more commonly known as the avian flu virus, suggests that there is a one in five chance of a pandemic that is more severe than that experienced in 1918.

Avian flu, which was first noted in Asia, has viral characteristics that will increase the likelihood of a virulent pandemic if it provides genetic material for human-to-human influenza transmission.

RMS believes that many companies may be underestimating their risk if they assume that the 1918 pandemic is the worst-case scenario. The RMS Influenza Pandemic Risk Model is intended to help insurers assess the losses they could experience from pandemics with all of the different permutations of potential characteristics and outcomes.

Although a number of pandemic influenza scenarios have been publicized, RMS said effective risk management requires quantification of not only the severity of an event, but also the likelihood of the event occurring.

The RMS model incorporates over 1,800 pandemic influenza scenarios that take into account such factors as likelihood of the pandemic occurring, infectiousness and lethality of the pandemic, demographic impact, country of outbreak, vaccine production, and national countermeasures.

“Understanding the science is essential to understanding the risk–this is as true for governments as it is for insurance companies in making decisions about how to manage the risk,” RMS advisor Neil Ferguson, professor of mathematical biology at Imperial College, London, said in a statement.

“Pandemic influenza could potentially deal insurers a triple whammy, simultaneously causing unprecedented life and health claims losses, investment portfolio downturns at a time when insurers most need liquidity, and reduced staff and management productivity through the spreading of sickness among company personnel,” said Andrew Coburn, RMS project lead on influenza pandemic risk modeling.

“Moreover, influenza pandemics can last two to three years,” he said, “making it essential for insurers to put in place a multiyear risk management strategy that considers the reinsurance crunch that will likely occur in the event of a pandemic.”

Dr. Coburn said the RMS model provides a probabilistic assessment of losses to help insurers make decisions on risk transfer and medium-term portfolio management, as well as detailed scenarios for planning short- and long-term risk management strategies.

RMS noted that life and health insurance portfolios are very different from property portfolios and said its model enables insurers to incorporate a detailed analysis of their own specific portfolio, allowing the characteristics of individual companies’ policyholders to play an important role in the risk assessment process.

The new model and its implications for the insurance industry will be presented at an RMS seminar on the “Management of the Influenza Pandemic Risk” to be held June 1 in New York City.

The seminar will feature a guest presentation, “Understanding the Threat of Pandemic Influenza,” by Professor Marc Lipsitch of the Department of Epidemiology, Harvard School of Public Health.

Advance registration and approval by RMS is required. Details and registration information are available at