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Pandemic risks have life insurers weighing options

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Life insurers are anticipating a surge in the number of epidemics and pandemics in the next decade, but it's unclear if their rates will rise in response.

Munich American Reassurance Co. surveyed 100 individual life insurance underwriters in May and found that 70% of them expect epidemics and pandemics to increase in number and severity in the next five to 10 years.

But while fear of the Zika virus has been top of mind for many individuals and travelers, nearly half of life insurers — 46% — see influenzas, like the bird flu or swine flu, as the riskiest potential pandemics for policyholders.

Only 14% of life insurers surveyed believe Zika virus is the riskiest, while 8% said Ebola and 7% said severe acute respiratory syndrome, or SARS, carried the most risk for policyholders.

Another 25% surveyed said a disease that's currently unknown could carry the most risk.

These results ring true for the group life insurance market as well, said Steve Rulis, Atlanta-based vice president of group reinsurance for Munich American.

“There's a bigger concern and a bigger probability of unknowns with influenzas,” he said. That's because many of them present new mutations and strains that are unpredictable, he said.

Zika, on the other hand, isn't typically fatal, so “we're not expecting a material spike in death claims on the individual life side or the group life side,” Mr. Rulis said.

To determine the risk and the insurance rates for groups and individuals, life insurers attempt to figure out what percentage of their insured population could become exposed to the disease, and then how many of those exposures could prove fatal.

So to prepare for the expected uptick in epidemics, Mr. Rulis said Munich American and group life insurers are using predictive modeling and “scenario testing” to better anticipate future potential outbreaks.

“Influenza or bird flu as a driver of a potential pandemic is absolutely something that we are modeling, and we've seen much more interest from our group life clients over the last five years or so in terms of tapping into the modeling that we're doing,” Mr. Rulis said.