AIR Model Estimates Pandemic Flu Losses

Catastrophe risk modeling firm AIR Worldwide (AIR) has released a Pandemic Flu Model, which it says captures the excess morbidity, mortality, and insurance losses caused by pandemic influenza.

AIR said the model includes more than 18,000 simulated events, ranging in severity from mild to severe, that can start and spread anywhere in the world and last from months to years.

This new model builds upon AIR’s existing mortality modeling capabilities that enable clients to enter injury or life exposures in its natural catastrophe models to obtain estimates of loss. AIR is a member of Verisk Analytics.

“Pandemics are low-frequency events with a potentially high level of severity and impact to insurers and reinsurers in the areas of life, health, and disability,” said Nita Madhav, senior scientist at AIR Worldwide. “Other lines such as workers’ compensation, personal accident and business interruption may also incur significant losses, depending on policy specifics.”

AIR said it developed the model to capture disease transmission dynamics along with short- and long-range population movements. The hazard component models ignition parameters, pathogen characteristics and seasonality. The model also explicitly accounts for mitigation efforts during the pandemic, such as the development and administration of vaccines, antivirals and travel restrictions.

It estimates infection severity, medical outcomes and insurance losses by gender and age.

In developing the model, AIR said it created a unique exposure database that includes worldwide population data, age distributions, sex ratios, and preexisting health conditions, all of which can mitigate or exacerbate a pandemic.

“The 1918 Spanish flu pandemic was one of the largest public health catastrophes of the past century, causing life insurance losses of nearly $100 million, which is comparable to nearly $20 billion today,” said Madhav. “Insurers striving to manage pandemic risk need to know that a modern-day pandemic on par with the Spanish flu of 1918 could occur. Of course, post-1918 medical advancements and the graying of the global population would affect the severity of a pandemic today. Probabilistic modeling accounts for medical advancements and other societal changes and enables a more complete understanding and management of pandemic risk than relying on the historical record alone.”

The AIR Pandemic Flu Model is currently available in Version 15.0 of the CATRADER catastrophe risk management system.

Topics Profit Loss COVID-19