Canadian Institute of Actuaries L’Institut canadien des actuaires 2006 Seminar for the Appointed Actuary Colloque pour l’actuaire désigné 2006

Reinsurance – Pandemic Risk Reinsurance solutions Role of the Actuary

Reinsurance Solutions Define the Risk What pandemic coverage exists within the portfolio to be reinsured? Factor in Uncertainty Coverage definitions may be given liberal interpretations Consider multiple events

Uncertainty – Excess Mortality   EID Journal Vol 12, No 1, January 2006 1918 Influenza: The Mother of All Pandemics

Defining the Risk - Example Group Life Industry In-Force 2004* $8,712.79 B Sample Ins Co 2004 Group Life In-Force $2,000.00 B Estimated Market Share 23% Moderate Severe US Pandemic Industry Loss** $11.20 B $54.40 B Insurance Co Share of Loss $2.39 B $11.59 B *Source: A.M. Best Co. **Source: III estimates a Moderate Scenario based on 1957 and 1968 pandemics, and a Severe Scenario based on 1918 pandemic (Group Life)

Reinsurance – Pandemic Risk 5 Risk Categories Mortality Morbidity Reinsurance Credit Risk Economic Risk Operational Risk

Reinsurance – Pandemic Risk Types of Reinsurance Structures: Abnormal Mortality Stop Loss Occurrence-based Catastrophe Coverage Index-Based Coverage

WHO Pandemic Stages

Reinsurance – Pandemic Risk Role of the Actuary: “Actuaries have practical business sense, the creativity to apply training and experience to new problems and provide innovative solutions, and the communication skills required to convince both colleagues and clients.”

Sources & Events Useful Sources: www.pandemicflu.ca www.soa.org www.pandemicflu.gov Standard & Poor’s “Determining the Insurance Ramifications of a Possible Pandemic” CBO Report “A Potential Influenza Pandemic: Possible Macroeconomic Effects and Policy Issues” December 8, 2005 revised July 27, 2006 Upcoming events: IBC – Pandemic Preparedness Workshop, Oct 30 2006 SOA Risk Management Section Pandemic Influenza Webcast, Oct 5 2006