Report predicts avian flu impact

If a worldwide outbreak of the avian flu which so far as been confirmed in only 117 humans were to shut down parts of the global economy, how much of the resultant economic damages would be covered by insurance?
The answer is “uncertain,” says a recent report on avian flu by A.M. Best.
Insured losses due to a hypothetical outbreak of avian flu would most likely affect workers’ compensation, business interruption insurance, business clean-up and travel insurance, says the A.M. Best Report. But it goes on to say “business owners policies typically cover only interruptions caused by physical damage to a facility.”
Environmental impairment liability contracts typically exclude “naturally occurring substances” under the definition of a pollutant, which would preclude coverage under EIL policies for similarly virulent and contagious diseases such as SARS, the report suggests.
The A.M. Best study cites a 2004 RMS estimate of insurance costs due to a hypothetical outbreak at US$41 billion in the United States alone. The figure is determined based on claims made in the categories of group life, individual life, workers’ compensation and health insurance.
“The food industry likely will be hard hit by avian flu, given the 1997 Hong Kong outbreak, which led to the destruction of 1.5 million birds as part of the containment effort,” the A.M. Best report says. “(Pennsylvania State University business studies director Fariborz) Ghadar said international supply chains for poultry and waterfowl will be disrupted, with trickle-down effects on restaurants and other food outlets.”
But this will not have much of an effect on the insurance industry, as animal mortality and product recall coverages would not normally apply to poultry and waterfowl stock. “Business interruption claims would also not likely apply, since policies normally require some sort of physical damage to plant and equipment.”