Pandemics
In July 2007 Swiss Re marked the launch of “Pandemics” as a Top Topic with the publication of a new technical publishing brochure – ‘Pandemic influenza: A 21st century model for mortality shocks’.
Pandemic influenza is a material risk with the potential to affect countries around the world at much the same time. A lethal pandemic is a key driver of capital requirements for Swiss Re, as the world’s leading reinsurer of mortality risk with a globally diversified book of mortality business.
While mortality has generally been improving for many decades, life insurers still face the risk that an influenza pandemic could cause a one-time “mortality shock”. It is not easy to specify in advance the loss value from such an event. This makes it difficult for life insurers to quantify the risk and to manage their capital efficiently, often because many companies lack the tools to determine the loss value and the amount of capital to hold.
With the move in many markets from a rules-based or formulaic solvency requirement to a principles-based approach, regulators are also now showing an increasing interest in the use of internal models. At the same time, there is a heightened general awareness of a pandemic threat, with various views being expressed on the possible impact.
In light of these developments, Swiss Re has created a sophisticated epidemiological model to improve the level of understanding of the potential range of outcomes from a pandemic, and to better understand the impact of the many intervention options available to governments – such as antibiotics, antivirals, vaccines and the closure of schools – should a pandemic arise.
Headline results
The headline result obtained from the model is Swiss Re’s estimate that, in most developed countries, a 1-in-200-year severity pandemic would give rise to excess mortality of between 1 and 1.5 deaths per 1 000 lives within an insurance-age portfolio.
The model also shows that the world’s worst influenza pandemic in 1918, a unique event in 420 years, would have a much lower impact on mortality today than it did in that year.
Besides explaining the model, the publication provides detailed background on avian influenza, and human influenza history and treatment. It also contains an analysis of the 1918 influenza pandemic, along with a quantification of how the many changes that have occurred since that time would materially reduce mortality from a similar virus occurring today.
‘Pandemic influenza: A 21st century model for mortality shocks’ follows an earlier publication by Swiss Re in April 2007 entitled ‘Influenza pandemics: Time for a reality check?’. The July publication expands upon the scope and depth of the April report.
“We believe that the output from our epidemiological modelling will assist both insurers and regulators in considering how to manage the risk of a one-time ‘mortality shock’ arising from an influenza pandemic.
"With the growing interest in developing internal models and the move towards principles-based supervisory approaches in many markets, this is the ideal time to consider the appropriate levels of excess mortality in capital models.
“Swiss Re is pleased to be making a key contribution to this highly topical issue.”
Bob Howe
Chief Risk Officer
Life & Health
Pandemics Top Topic manager
Links to publications
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July 2007 – ‘Pandemic influenza: A 21st century model for mortality shocks’.
- April 2007 – ‘Influenza pandemics: Time for a reality check?’
