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U.S. Life Insurance Industry As A Whole Can Withstand Major Pandemic Event, According To New Report From The Society Of Actuaries
- For Immediate Release: June 06, 2007
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Society of Actuaries Releases Report on Potential Impact of Pandemic Influenza on the U.S. Life Insurance Industry
Schaumburg, Ill.–According to actuarial models, a severe pandemic could result in life insurance claims of $125.7 billion in the United States alone. That leads to an important question: Does the U.S. life insurance industry have sufficient resources to meet the insurance claims? According to a leading group of actuaries, the answer is "yes."
A new report from the Society of Actuaries, Potential Impact of Pandemic Influenza on the U.S. Life Insurance Industry, quantifies life insurance industry exposure by analyzing data from historical pandemic events and building industry assumptions for mortality rates, gross claims, reserves, reinsurance credits and the impact of taxes.
"The important finding is that the U.S life insurance industry as a whole is prepared to weather even a severe pandemic," said Tom Edwalds, FSA, ACAS, MAAA, chairperson of the SOA project oversight group and assistant vice-president for mortality research at Munich American Reassurance Company.
Authored by Jim Toole, FSA, MAAA, a consultant with MBA Actuaries, the SOA report covers two pandemic scenarios based on historical examples to gauge a pandemic’s potential impact on life insurance companies. A moderate scenario of 209,000 general population deaths is based on a 1957 pandemic event, which would yield $2.8 billion in net claims to direct writers. A severe scenario of 1.9 million deaths is based on a 1918 pandemic event, which would yield $64.3 billion in net claims.
Pandemics and Enterprise Risk Management
The SOA report also points out that there is a strong need for insurers to examine and strengthen their level of business continuity preparation to best manage the impact of a pandemic as part of the overall enterprise risk management process.
"The risk of a pandemic is not a typical risk management issue, since the pandemic could be on a large scale taking place for an extended period of time," stated Max Rudolph, FSA, CFA, MAAA, Rudolph Financial Consulting. "There are many critical questions that businesses need to
consider to help ensure business continuity. These include the logistics of having employees telecommute or work at alternative sites and a policy on sending sick workers home along with those individuals in contact with them. After all, a pandemic could last for two years and with perhaps three distinct waves of unique virus. All of these issues need to be discussed with internal and external stakeholders in advance, because once a pandemic hits it is likely to be too late for planning."
Pandemic and enterprise risk management considerations:
- Do not restrict succession plans to senior leaders, as contingency plans need to also account for key players throughout the firm.
- Develop a plan for employees who are traveling, both domestically and internationally, to reduce exposure levels to the pandemic.
- Determine whether employees are allowed or expected to work from home in continuing business operations.
- Determine whether antiviral medicine will be provided to employees traveling or domestic.
- For self-insured companies, research how a pandemic-induced recession and high claims will affect business continuity.
- Analyze your company's supply chain, review vendors' pandemic plans and review delivery service operations.
- Determine your company's role in the community if a pandemic were to occur. For example, some companies may decide to use their facilities as a temporary hospital or to provide food for non-employees.
For a complete copy of the SOA report, Potential Impact of Pandemic Influenza on the U.S. Life Insurance Industry, and additional information and risk modeling tools, click  here.
About Actuaries
Actuaries bring a complex future into focus by applying unique insight to risk and opportunity. Known for their comprehensive approach, actuaries enable smart, more confident decisions.
About the Society of Actuaries
The Society of Actuaries is an educational, research and professional organization dedicated to serving the public and its members. The SOA’s mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal problems involving uncertain future events.
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