Re: Potential Impact of Pandemic Influenza on the U.S. Life Insurance Industry
<o:smarttagtype namespaceuri="urn:schemas-microsoft-com
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ffice:smarttags" name="stockticker"></o:smarttagtype><!--[if gte mso 9]><xml> <o:OfficeDocumentSettings> <o:RelyOnVML/> <o:AllowPNG/> </o:OfficeDocumentSettings> </xml><![endif]--><!--[if gte mso 9]><xml> <w:WordDocument> <w:View>Normal</w:View> <w:Zoom>0</w:Zoom> <w:Compatibility> <w:BreakWrappedTables/> <w:SnapToGridInCell/> <w:WrapTextWithPunct/> <w:UseAsianBreakRules/> </w:Compatibility> </w:WordDocument> </xml><![endif]--><!--[if !mso]><object classid="clsid:38481807-CA0E-42D2-BF39-B33AF135CC4D" id=ieooui></object> <style> st1\:*{behavior:url(#ieooui) } </style> <![endif]--><!--[if gte mso 10]> <style> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin:0cm; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman";} </style> <![endif]--> I have to say I loved this one. It is a really nice report but of course it falls into the same trap as all the others and I am fairly sure at least some of the authors knew it.
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The clues start even before the table of contents when they give this quote a whole page immediately below the title.
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“There is an awesome crack between unlikelihood and impossibility.”<o></o>
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Richard Neustadt and Graham Allison<o></o>
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The introduction opens with
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1. INTRODUCTION<o
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The first known case of the H5N1 avian influenza virus jumping the species barrier to humans occurred in <st1
lace>Hong Kong</st1
lace> in 1997.
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And then goes on to make it clear that while there are other potential pandemic candidates H5N1 is why they have been tasked with writing the paper.
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as of <st1:date month="4" day="2" year="2007">April 2, 2007</st1:date>, the WHO reported that the number of confirmed human cases had risen to 288 and confirmed deaths to 170 for a mortality rate of 59 percent.
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>Makes it quite clear they are aware of H5N1’s <st1:stockticker>CFR</st1:stockticker> but the paper then beautifully lays out two scenarios labelled Moderate & Severe based on 1957 (0.6 excess death per 1000) & 1918 (6.5 excess deaths per thousand) without any kind of explanation of how or why the H5N1 they say they are modelling for is expected to go from a fairly consistent – across time and clades - 50%+ <st1:stockticker>CFR</st1:stockticker> to one of well under 5% even in the Severe model.
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If we ignore the elephant in the room, previously discussed, there is one other problem which is not addressed numerically but is covered here
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Some important elements affecting the full economic impact of a pandemic to the insurance industry have not been estimated quantitatively, including but not limited to the impact on asset values, gains on release of payout annuity reserves, cost of guarantees on variable products and potential liquidity and disintermediation risks. A pandemic will have significant economic consequences for the <st1:country-region><st1
lace>United States</st1
lace></st1:country-region> and global economies. It is important that the actuary consider the potential economic consequences and their implications to an insurance company.
It is easy to get lost in the enormous volumes of calculations and pages of detailed analysis but if your model is built on wishful thinking what’s the point?
