SAN FRANCISCO--The insurance industry has the capital capacity to handle a pandemic outbreak, an actuary told a session of the National Association of Insurance Commissioners meeting here.
The statement by Tom Edwalds, a representative of the Society of Actuaries, Schaumburg, Ill., and Munich American Reassurance Co., Atlanta, was based on pandemic risk model.
While $64 billion in net claims would hurt insurers, the "unpleasant and uncomfortable" tab would be well within the capital ability of the industry, according to Mr. Edwalds.
He said the $64 billion total estimated under a severe scenario includes $34 billion in individual life net claims and $30 billion in group life net claims, according to the SOA report. Individual life gross claims would surge to $79 billion and group life gross claims would grow to $47 billion, the report said. Individual net claims represents gross claims less reductions including reserves released, reinsurance credit and tax savings.
The model uses two scenarios: a "severe" scenario similar to the 1918 Pandemic and a moderate scenario similar to an uptick in deaths experienced in 1957. The severe scenario estimates 1.9 million deaths in the United States, while the moderate scenario estimates in excess of 200,000 deaths.
Under the moderate scenario, the net claims effect would be $2.8 billion, the report found. That would include $1.3 billion from individual life net claims and $1.5 billion from group life net claims, it said. Gross claims surge would include $4.5 billion from individual life and $2.3 billion from group life, the SOA study continued.
The SOA report said that a severe pandemic would have an impact on the economy, Mr. Edwalds told regulators at the NAIC's Life & Health Actuarial Task Force. Asset values would decline and a global recession would be possible, but it is also possible that the impact would be of a short duration, the report found.
The report put the findings in context, noting that 2005 claims volume was $108 billion. It made no mention of possible workers' compensation claims, which according to a model created by Risk Management Solutions could amount to $400 billion.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
