Bird Flu Doesn't Faze Insurers

Insurers remain fairly nonchalant about the potential impact of an avian flu pandemic on the industry, according to a new report from Standard & Poor's.

"Given the legitimate fears avian flu is sparking among epidemiologists, health officials, business and government executives, and the public at large, you might think the U.S. insurance industry would also be in a deep sweat about the possibility of a pandemic," said S&P analyst Rodney Clark, one of the authors of the report.

However, until human-to-human transmission actually happens--which to date it has not--insurers see the potential for damage to their financial health as marginal, the report states.

Some U.S. property-casualty insurers have looked into potential exposures for business interruption or other coverages, "but overall, especially at commercial insurers, the industry views pandemic exposure as an operational risk--such as employees not coming to work--rather than a source of claims," the report states.

If a pandemic were to strike, business-continuation policies would generally not be triggered, as infectious disease is not a covered peril. "But companies that have incurred-but-not-reported reserves available for other latent liabilities" could use them to cover such claims, the report states.

Workers' compensation could see a small jump in claims, but only for poultry workers who contract the bird flu directly as at the workplace. "It would not be available for those whose work doesn't bring them into direct contact with potentially infectious agents," the reports states.

Mr. Clark said that U.S. carriers have not begun to offer coverage specifically aimed at avian flu. But one Canadian company, Mint Canadian Specialty Underwriters, plans to test-market "outbreak contingency cover" for Canadian businesses.

"Traditional catastrophic reinsurance would be of little use against any pandemic, whether avian flu or other, because it's designed to cover specific, discrete catastrophic events where deaths occur in a limited timeframe such as terror events, hurricanes or earthquakes," Mr. Clark noted.