Study May Spark New Pandemic Risk Transfer Debate

A study released Thursday says that a global “Bird Flu” pandemic is much closer to realization and may force reinsurers and catastrophe modelers to revisit assumptions and create a renewed push into “mortality bonds.”

A series of studies released in the journal Science says that a deadly the virus commonly found in avian hosts is several fewer steps away from turning a deadly global human pandemic. In 2009 a strain of the bird flu – also referred to at the H1NI virus – killed 17,000, according to the World Health Organization.

The study says that the deadly bird flu virus may be only five, to as few as three, mutations from moving into mammal to mammal transmission mainly through respiratory droplets resulting in an easily spreadable deadly pandemic.

Common scientific and modeling assumptions previously assumed far more bsteps until the bird flu could be passed from person to person.

But the researchers’ new modeling methods now reveal a much different scenario.

“The model takes into account a variety of factors, such as the duration of the infection and whether individual mutations by themselves benefit the virus,” the journal Nature says. “The conclusion says first author Colin Russell of the University of Cambridge, is that a virus that is only three mutations away from the full set is “likely” to acquire them and end up in droplets.”

The research adds that while the model shows an easier course for a global pandemic, they “can’t put a number on that risk; there are too many unknowns.”

While are several hundreds of millions of cases of seasonal influenza cause between 250,000 to 500,000 deaths, a pandemic influenza could infect “billions of people and potentially causing millions of deaths,” the study says

A previous study by the Society of Actuaries estimated in 2007 said that a “severe” pandemic scenario would cost the life insurance industry $64.3 billion in claims alone, with healthcare insurance claims costs as high as $230 billion.

Following a 2005 bird flu threat several brokers and catastrophe modelers – including RMS and Milliman — created pandemic modeling software in order to capture life insurers risk.

In addition, several reinsurers issued so-called “mortality bonds” that sought to protect against pandemic losses. Currently, Swiss Re’s Vita series bonds remain with nearly $200 million in risk outstanding and Munich Re’s Nathan Ltd. Mortality bond with $100 million that expires next year.

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