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

2. Agenda Insurance Implications of Pandemic Risk Mitigation Life Health
Individual
Group
Health
P&C
Personal lines
Commercial
Risk Mitigation

3. Pandemic Assumptions Limited access to vaccines
Managed by gov’t health care authorities
10% hospitalization rate
Average hospital stay 4 days
Persons infected will be away from work for 21 days
No long term impact from virus

4. Pandemic Statistics
“A Potential Influenza Pandemic: Possible Macroeconomic Effects and Policy Issues”
Congressional Budget Office, July 27, 2006
10-13 pandemics since 1700
3-4% chance of pandemic in any year
0.3% chance of severe pandemic
1918 was severe (25-30% infection, 11% death rate)
1918 hit hardest

5. Life Insurance Individual Life Group Life Annuities
Increased mortality
Increased benefit levels
Group Life
Concentration risk
Larger employer groups = higher exposure
Annuities
Increased mortality is a benefit

6. Life Insurance Individual claims will be larger than normal averages
Companies with higher recent sales may see more severe experience
Claims will depend on age of those most susceptible to infection
Working ages are most likely to buy or have life insurance

7. Health Insurance Short Term Disability Long Term Disability
Moderate to severe impact
Long Term Disability
Few claims (6 month elimination period)
Long Term Care
Few claims
Increased lapses
Critical Illness
Medical
Anti-selection
Increased demand on services reduced by fewer elective procedures

8. Personal Lines Insurance
Auto
Little effect
Accident Benefits?
Homeowners
Possible clean up costs, to the extent covered
Similar issues to mould
Travel
Out of country medical
Trip cancellations rise dramatically

9. Commercial Insurance Property coverages Liability coverages
Clean up costs
Business interruption (if covered)
Liability coverages
Bodily injury definition/employment excl.
Duty to defend
Medical Malpractice
Increase in medical service = increased claims
D&O
Pandemic plan in place?

10. Mitigation Options Modifying coverage terms Aggregate caps on exposure
Exclusions
Aggregate caps on exposure
Portfolio event limit
Geographic limitations
Reinsurance
Capacity Issues

11. Summary Historical probability of severe pandemic low
Impact to life insurance
Significance proportional to severity
Impact to accident & health insurance
Modest - medical coverages & STD
Impact to P&C insurance
Modest – travel & commercial covers