Global pandemic flu model released by AIR Worldwide

AIR Worldwide has announced the availability of a new pandemic flu model meant to capture the excess morbidity, mortality and insurance losses caused by pandemic influenza.

Business interruption is among the areas where insurers and reinsurers may incur potentially significant losses, notes a statement from AIR Worldwide, a member of the Verisk Insurance Solutions group at Verisk Analytics.

The model is currently available in Version 15.0 of the CATRADER catastrophe risk management system.

“Pandemics are low-frequency events with a potentially high level of severity and impact to insurers and reinsurers in the areas of life, health and disability,” Nita Madhav, senior scientist at AIR Worldwide, says in the statement. “Other lines such as workers’ compensation, personal accident and business interruption may also incur significant losses, depending on policy specifics.”

AIR Worldwide reports the model builds on existing mortality modelling capabilities in its catastrophe models, which allow clients to enter injury or life exposures to obtain estimates of loss. The model includes more than 18,000 simulated events, ranging in severity from mild to severe, that can start and spread anywhere in the world and last from months to years.

The model models ignition parameters, pathogen characteristics and seasonality, while infection severity, medical outcomes and insurance losses are estimated by gender and age cohort. AIR Worldwide has created an exposure database that includes worldwide population data, age distributions, sex ratios and pre-existing health conditions – all of which can mitigate or exacerbate a pandemic.

Using illness outcomes and associated costs from Verisk Analytics subsidiary Verisk Health, the model also explicitly accounts for mitigation efforts during the pandemic, including the development and administration of vaccines, antivirals and travel restrictions, the statement adds.

The Public Health Agency of Canada notes it has been projected that up to 30% to 35% of the workforce may be absent due to the effects of pandemic influenza on individuals and families.

“In the event of a major outbreak, governments and public bodies could have to take immediate action to prevent the spread of infection,” notes information from Aon Risk Services. “This may include the closure of buildings and areas, which would, in turn, have an adverse impact on companies’ ability to perform normal business operations.”

A guide on influenza A (H1N1) and business interruption, released by Marsh in 2009, notes that business interruption does not cover, for example, a decline in business or a reduction in demand for the insured’s products because traffic diminishes in the area where the insured’s business is located.

“One exception to this is the ‘civil authority provision’ that grants limited coverage to an insured business when governmental authority prohibits access to the insured’s premises. However, that prohibition must be triggered by an event that would be covered by the insured’s own policy if it had happened at the insured’s own premises.”