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CRO Forum Position Paper on influenza pandemic published

A prominent example of a mortality shock event
As important representatives of the risk community, the Chief Risk Officers of major (re)insurance companies have decided to address the challenge of pandemic shock event within the CRO Forum’s Emerging Risks Initiative and communicate their view on how the insurance industry could address this risk.
There has been much speculation about the likely timing and severity of the next influenza pandemic. This includes widely differing views as to how a pandemic might unfold and what excess mortality figures may result. Without any doubt, a pandemic constitutes a material tail event for the insurance industry. Financial repercussions on both sides of the industry’s balance sheet must therefore be evaluated.

An analysis of past events is an essential prerequisite for a realistic evaluation or forecast of a potential future threat. However, as pandemics are relatively rare (only three in the last century) the pool of historical data is limited and over the same time major medical progress has been made. For this and other reasons, we expect that excess mortality would be significantly lower if a pandemic as severe as that experienced in 1918 were to occur again today. As a result, simple extrapolation of the excess mortality rate observed in 1918 to today’s global population would be unrealistic.

Nonetheless, the insurance industry – especially the Chief Risk Officers as important representatives of the risk community – are well aware that the next pandemic does not necessarily have to be caused by an avian flu virus, nor does it have to be an influenza virus at all. However, the focus of the position paper is the influenza pandemic only – as an example of a mortality shock event and its potential impact on the insurance industry.

The position paper provides a consolidated view of the potential impact of the 1918 “as if” scenario. The publication shows an approach to simulate a mortality shock event such as a pandemic. It also investigates the question which excess mortality would likely arise today if an influenza pandemic as severe as the Spanish flu of 1918 were to occur. Also a short overview on how the insurance industry can prepare for the risk is included in the paper.

The CRO Emerging Risks Initiative (ERI) was launched in 2005 to raise awareness of major emerging risks relevant to society and the (re)insurance industry. The initiative is currently chaired by Munich Re and consists of eight members representing Allianz, AXA, Munich Re, Swiss Re, Zurich Financial Services as well as Chubb, Insurance Australia Group and Royal & SunAlliance.

Pierre Perrin-Monlouis
Pierre Perrin-Monlouis
Fondateur de Rente et Patrimoine (cabinet de gestion de patrimoine), Pierre Perrin-Monlouis est un analyste et trader pour compte propre. Il vous fait profiter de son expérience en trading grâce à ses analyses financières et décrypte pour vous les actualités des marchés. Son approche globale des marchés combine à la fois l'analyse technique et l'analyse fondamentale sur l'ensemble des marchés : crypto, forex, actions et matières premières.