Transcript Canadian Institute of Actuaries L’Institut canadien des

Canadian
Institute
of
Actuaries
L’Institut
canadien
des
actuaires
IP-19 Pandemics – Impact on Group Insurance
2006 General Meeting
Chicago, Illinois
Hugo Maureira
Cathy Shum-Adams
Philippe Trahan
Session Content
•
•
2006 General Meeting
Assemblée générale 2006
•
•
•
•
•
•
Slide
2
General overview of Avian Flu (H5N1)
Impact of a Pandemic on the economy and
businesses
BCP & risk management for a Pandemic
Pandemic planning – info from OSFI, CLHIA ,
AMF
Impact of a Pandemic on Group Benefits –
what one insurer has tried to quantify
Modeling of a Pandemic scenario &
reinsurance solutions available
Conclusion
Q&A
Session Content
•
General overview of Avian Flu (H5N1)
By Cathy Shum-Adams
•
2006 General Meeting
Assemblée générale 2006
•
Slide
•
•
•
•
•
3
Impact of a Pandemic on the economy and businesses
BCP & risk management for a Pandemic
Pandemic planning – info from OSFI, CLHIA , AMF
Impact of a Pandemic on Group Benefits – what one
insurer has tried to quantify
Modeling of a Pandemic scenario & reinsurance
solutions available
Conclusion
Q&A
WHO – Current Alert Level
2006 General Meeting
Assemblée générale 2006
November 2005
Slide
4
Source: www.who.int
WHO – Current Alert Level
2006 General Meeting
Assemblée générale 2006
• WHO Level 6 Pandemic –
Efficient & sustained human-tohuman transmission
Slide
– Connection between Bird flu, Human
flu & Pandemic flu:
• Bird flu + Human flu = Pandemic flu
5
General Overview of Avian Flu
•
Nations with confirmed cases H5N1 Avian Influenza:
2006 General Meeting
Assemblée générale 2006
July 7, 2006
Slide
6
Source: www.pandemicflu.gov
General Overview of Avian Flu
Cumulative Number of Confirmed Human Cases of Avian Influenza
Reported to WHO
October 11, 2006
2006 General Meeting
Assemblée générale 2006
0
0
0
0
0
0
8
5
8
5
Cambodia
0
0
0
0
4
4
2
2
6
6
China
1
1
0
0
8
5
12
8
21
14
Djibouti
0
0
0
0
0
0
1
0
1
0
Egypt
0
0
0
0
0
0
14
6
14
6
Indonesia
0
0
0
0
19
12
50
40
69
52
Iraq
0
0
0
0
0
0
3
2
3
2
Thailand
0
0
17
12
5
2
3
3
25
17
Turkey
0
0
0
0
0
0
12
4
12
4
Viet Nam
3
3
29
20
61
19
0
0
93
42
Total
4
4
46
32
97
42
105
70
252
148
Source: www.who.int
7
cases deaths cases deaths
Azerbaijan
Mortality rate = 58.7%
Slide
deaths
cases
deaths
cases
deaths
cases
Total
2006
2005
2004
2003
Country
Pandemics – Trivial Questions
2006 General Meeting
Assemblée générale 2006
• Last 3 pandemics in the 20th
century – 1918, 1957 & 1968:
Slide
• Did they all involve a strain of the
Avian flu?
• Did they originate from southeast
Asia?
• Why was the 1918 pandemic named
the Spanish Flu then?
8
Preparedness Mindset
•
What the medical experts are saying …
1918  1957  1968  ??
2006 General Meeting
Assemblée générale 2006
•
Slide
•
“That will never happen” mentality & shortterm memories
Short history of potential disasters… that never
happened. Remember these?
Y2K
–The Ebola Virus
–Mad Cow Disease
–Killer Bees
–
9
2006 General Meeting
Assemblée générale 2006
Preparedness Mindset
Slide 10
• Pandemic – planning for the unknown –
STUFF HAPPENS!
• Accept that we’re planning for a risk where
much is unknown
• Donald Rumsfeld’s approach to analysis:
– The known knowns
– The known unknowns
– The unknowns unknowns
Session Content
•
•
General overview of Avian Flu (H5N1)
Impact of a Pandemic on the economy and businesses
By Hugo Maureira
2006 General Meeting
Assemblée générale 2006
•
Slide 11
BCP & risk management for a Pandemic
By Hugo Maureira
•
•
•
•
•
Pandemic planning – info from OSFI, CLHIA , AMF
Impact of a Pandemic on Group Benefits – what one
insurer has tried to quantify
Modeling of a Pandemic scenario & reinsurance
solutions available
Conclusion
Q&A
2006 General Meeting
Assemblée générale 2006
Outline
Slide 12
I.
Social and Economic Impact
II.
Pandemic Business Continuity Planning
III.
Legal Considerations
12
2006 General Meeting
Assemblée générale 2006
Objectives
Slide 13
•
•
•
•
•
To give an overview of the potential economic impact
that a pandemic may have on Canada, the United
States and the World
To stress the importance of emerging economies in
considering the potential economic impact
To offer a balanced view free of fear mongering on
the one hand, and cynicism on the other
To explain the uniqueness of pandemic BCPs, what
they might contain and specific items to consider
To explain how the post-SARS legal environment
might affect businesses particularly with respect to
workplace health and safety and 3rd party liability
2006 General Meeting
Assemblée générale 2006
I. Social and Economic Impact
Slide 14
1. Behavioural Changes
2. Projected Losses
3. Emerging Economies
14
I. Social and Economic Impact
1. Behavioural Changes
2006 General Meeting
Assemblée générale 2006
• Consumer Confidence
Slide 15
– Consumer habits and social patterns
– New opportunities
– The economics of mass panic: SARS
15
I.
Social and Economic Impact
1. Project Losses
2006 General Meeting
Assemblée générale 2006
Public Health Impact
Slide 16
Region
Clinically Ill
Deaths
Hospitalizations
Outpatient
Visits
World
n/a
2 to 8 million
(conservative
estimate)
n/a
n/a
Canada
4.5 to 10.6
million
11,000 to 58,000
34,000 to 138,000
2.1 to 5.0
million
Ontario
n/a
2,892 to 19,733 but
most likely 5,100
to 11,899
7,474 to 65,498
but most likely
22,276 to 51,978
1,421,245 to
3,316,237 but
most likely
990,974 to
2,312,272
Toronto
n/a
632 to 4,260 but
most likely 1,111
to 2,590
1,621 to 14,008
but most likely
4,819 to 11,245
160,759 to
698,897 but
most likely
207,413 to
483,964
I.
Social and Economic Impact
2006 General Meeting
Assemblée générale 2006
1. Projected Losses
Slide 17
A brief word on projected loss
modeling…
• Meltzer, Cox & Fukuda
• FluAid 2.0
I.
Social and Economic Impact
1. Projected Losses
2006 General Meeting
Assemblée générale 2006
Economic Loss: World, Canada, and US
Slide 18
Region
Projected Economic Loss
World
$3 trillion
Canada
Health Care: $330 million to
$1.4 billion
Lost Productivity: $5 to $38
billion
United States
$220 to $670 billion
I.
Social and Economic Impact
1. Projected Losses
2006 General Meeting
Assemblée générale 2006
Impact on U.S. GDP Under Severe and Mild Scenarios
Slide 19
Scenario
Illness
Severe
Pandemic
Mild
Pandemic
Deaths
GDP
Recession
90 million 2 million
4 ¼%
drop
Yes
75 million 100,000
1% drop
No
I.
Social and Economic Impact
1. Projected Economic Loss
2006 General Meeting
Assemblée générale 2006
Impact on U.S. Labour Force Under Mild and Severe Scenarios
Slide 20
Scenario
Labour
Force
Size
(2004)
Attack
Rate
Mortality
Rate
No. of
Dead,
Labour
Force
(Raw)
No. of
Dead
Labour
Force (as
%)
Severe
Pandemic
147.4
million
30%
2.5%
1 million
0.75%
Mild
Pandemic
147.4
million
25%
0.1%
50,000
0.03%
I. Social and Economic Impact
2006 General Meeting
Assemblée générale 2006
2. Emerging Economies
Slide 21
• The influence of emerging
economies
• Avian influenza pandemic in Asia:
Implications for the world
economy
21
2006 General Meeting
Assemblée générale 2006
III. Pandemic Business
Continuity Planning
Slide 22
1. The Uniqueness of Pandemic Planning
2. Basic Structure
3. Issues to Consider
22
2006 General Meeting
Assemblée générale 2006
III. Legal Considerations
Slide 23
1.Lessons from SARS
2.Emergency Legislation
3.Employment Related Legislation
(Ontario and Canada)
23
BCP – Canada & U.S. Surveys
2006 General Meeting
Assemblée générale 2006
•
Surveys from Conference Board – both Canada and U.S. - how
prepared businesses are for a potential flu pandemic:
Concerned about impact
Preparedness plan in
place or working on one
No plan and not planning
on working on one
Canada
80%
75%
- 4% in place
- 71% working
25%
U.S
75%
25%
Canadian: 75 organizations
U.S.: 553 organization
More than 40% Canadian companies surveyed do not have a
communication strategy in their pandemic planning
Slide 24
Session Content
•
•
•
2006 General Meeting
Assemblée générale 2006
•
Slide 25
General overview of Avian Flu (H5N1)
Impact of a Pandemic on the economy and businesses
BCP & risk management for a Pandemic
Pandemic planning – info from OSFI, CLHIA , AMF
By Cathy Shum-Adams
•
•
•
•
Impact of a Pandemic on Group Benefits – what one
insurer has tried to quantify
Modeling of a Pandemic scenario & reinsurance
solutions available
Conclusion
Q&A
Pandemic Planning- OSFI
2006 General Meeting
Assemblée générale 2006
In April 2006, OSFI sent a pandemic letter to:
Slide 26
•
•
•
•
•
Federally regulated financial institutions (FRFIs)
CLHIA
Insurance Bureau of Canada (IBC)
Canadian Bankers Association (CBA)
Credit Union Centre of Canada
Letter to organizations, other than FRFIs:
•
Would like to know any initiatives each organization has
undertaken
Pandemic Planning- OSFI
Letter to FRFI’s:
2006 General Meeting
Assemblée générale 2006
• Pandemic preparedness an area of increasing
supervisory focus
Slide 27
• Discussing approaches in domestic and
international regulatory agencies for possible best
practices
• Board/Senior Mgmt should:
–Understand the potential implications of a pandemic on
operations and financial condition
–Review the institution’s preparedness pans
–Consider a pandemic scenario in financial stress tests
2006 General Meeting
Assemblée générale 2006
Scenario Testing - OSFI
Slide 28
•
•
•
•
Survey of big companies to test such a scenario:
Assume 6.2M Canadians fall ill
133,000 die
On average, sick workers miss 2 weeks of work
Age
0-14
15-19
20-24
25-34
35-44
45-54
55-64
65 and +
Excess mortality
per 100,000
486
450
650
946
475
221
137
60
In DCAT, consider an integrated scenario with increase in morbidity,
mortality and other impacts (e.g. economic).
2006 General Meeting
Assemblée générale 2006
Pandemic Preparedness Update CLHIA
Slide 29
• Activities underway to develop a
network of federal & provincial health
agency… communication
• Collaborated with Authorité des
marchés financiers (AMF)… guidance
on developing business continuity
planning
• CLHIA will continue to work with
AMF, OSFI and other regulators in
planning initiatives evolve.
2006 General Meeting
Assemblée générale 2006
Influenza Pandemic Guide - AMF
Slide 30
• Intended for Quebec financial
institutions
• In line with guidelines of the IMF &
Joint Forum of the Basel Comm.
• Assumes major economic impact,
followed by a rapid recovery
• Effects would be different from one
industry to another
• BCP to assume pandemics over a
lengthy period, several waves of varying
intensity could occur
Following data from AMF Influenza Pandemic Guide, August 2006
Influenza Pandemic Guide - AMF
2006 General Meeting
Assemblée générale 2006
•
Slide 31
Table 1 – Characteristics of the risk of an influenza pandemic
Risk Characteristic
Morbidity
Mortality
Occurrence date
Duration
Estimate
 35% in the 1st wave over an 8 week period
 Difficult to predict
 As of June 20, 2006 – actual mortality rate from avian flu was
57%
 Date when H5N1 virus mutates into a form transmissible
between humans
 Impossible to predict
 Several waves of variable intensity, around 6 weeks’ duration
 Overall duration could be from 12 to 36 months
Influenza Pandemic Guide - AMF
2006 General Meeting
Assemblée générale 2006
• According to the World Economic Forum:
Slide 32
• Scenario-based analysis:
– Base-case scenario – current trend
– Worst-case scenario – worst plausible
developments
• Scenarios considered for two different time
periods:
– Short-term over one year (2006)
– Long-term over 10 years (by end of 2015)
Influenza Pandemic Guide - AMF
• According to the World Economic Forum:
2006 General Meeting
Assemblée générale 2006
Table 2 – Levels of severity of the impact of an influenza pandemic
Slide 33
Score
1
2
3
4
(a)
Losses in terms
of human lives
< 100
100 to 10,000
10,000 to 1 M
Over 1 M
(b)
Economic impact
(losses in USD)
$10 - $50 B
$50 - $250 B
250 B to 1 T
Over 1 T
(c)
Impact on growth
(% of world GDP)
< 0.2%
0.2% to 0/7%
0.7% to 1.5%
Over 1.5%
Influenza Pandemic Guide - AMF
• According to the World Economic Forum:
2006 General Meeting
Assemblée générale 2006
Table 3 – Assessment of the risk of an influenza pandemic in terms of
probability & severity
Slide 34
Scenarios
S/T Base
S/T Worst
L/T Base
L/T Worst
Assumptions
- 30% morbidity in global population
- mortality is low
- absent from work for 2 weeks
- 2% reduction in World GDP
- 30% morbidity in global population
- mortality is 0.4%
- absent from work for 2 weeks
- 6% reduction in World GDP
- risk of the emergence of a human
influenza virus remains the same
- impact is only 1/3 of 2006
- pandemic risk is low in the developed
world but remains moderate elsewhere
Probability
1 – 10%
Severity
(a) – Score 3
(b) – Score 4
(c) – Score 4
1 to 10%
(a) – Score 4
(b) – Score 4
(c) – Score 4
1 to 10%
(a) – Score 2
(b) – Score 2
(c) – Score 2
(a) – Score 4
(b) – Score 4
(c) – Score 4
< 1%
Influenza Pandemic Guide - AMF
2006 General Meeting
Assemblée générale 2006
• Anticipated impact on Quebec – from Quebec
Department of Health:
Slide 35





35% affected in 1st wave over a 8-week period
2.6M people infected (1 out of 3)
1.4M people need care
34K people require hospitalization
8,500 people may die
Morbidity rate = 35%
Mortality rate = 0.33%
Session Content
•
•
•
2006 General Meeting
Assemblée générale 2006
•
Slide 36
•
General overview of Avian Flu (H5N1)
Impact of a Pandemic on the economy and businesses
BCP & risk management for a Pandemic
Pandemic planning – info from OSFI, CLHIA , AMF
Impact of a Pandemic on Group Benefits – what one
insurer has tried to quantify
By Cathy Shum-Adams
•
•
•
Modeling of a Pandemic scenario & reinsurance
solutions available
Conclusion
Q&A
General Overview of Avian Flu
•
Insurance Company Implication:
•
2006 General Meeting
Assemblée générale 2006
•
Slide 37
•
•
•
•
•
•
Excess claim risk
Liquidity risk
Credit risk
Supply-line disruptions e.g. TPA’s, assistance co’s
Counterparty risk
Reputation risk - Red Cross during Hurricane
Katrina
Workforce disruption with an increased demand for
services
Sales may go up? Premium rates may rise?
2006 General Meeting
Assemblée générale 2006
Excess Mortality Caused By Flu
Slide 38
13. Source: Centers for Disease Control and Prevention – Department of Health and Human Services
http://www.cdc.gov/ncidod/EID/vol12no01/05-0979-G2.htm
•
The rates of infection, morbidity and mortality, as well as their
distribution by age group, would no doubt have an effect on
the amount of claims & benefits to be paid.
2006 General Meeting
Assemblée générale 2006
Hypothetical Group Portfolio
Slide 39
Group STD
Annual Insured Premium
Avg Inforce Rate
Weekly Insured Volume
$100 million
$0.40 / $10
$208 million
Group Life
Annual Insured Premium
Avg Inforce Rate
Insured Volume
$100 million
$0.20 / $1000
$41.7 billion
2006 General Meeting
Assemblée générale 2006
Financial Impact – Group STD
Slide 40
Assumptions
Mild
Moderate
Severe
Infection Rate
25%
30%
35%
2 weeks
3 weeks
4 weeks
10%
20%
30%
2 weeks
4 weeks
6 weeks
Length of Illness
Quarantine Rate
Length of
Quarantine
•Financial Consequences: Assume $100 million annual premium,
common STD plan with 1 week EP, ignore first day hospital clause
Mild
Moderate
Severe
Illness Claims
$52 million
Quarantine Claims
$21 million
$125
million
$125
$208
million
$312
Total Claims
Increase
$73 million
million
$250
million
million
$520
million
Claims Spike
2006 General Meeting
Assemblée générale 2006
Financial Impact – Group Life
Slide 41
Assumptions
Mild
Moderate
Severe
Nightmare
Mortality Rate
0.03%
0.30%
0.67%
3.0%
•Financial Consequences: $100 million annual premium with approx $41.7
billion Group Life insured volume
Claims Spike
($ millions)
Mild
Moderate
Severe
Nightmare
Life Claims
$12.5
$125
$279
$1,250
2006 General Meeting
Assemblée générale 2006
Financial Impact – Group LTD
Slide 42
• Normal flu recovery period is 10
days
• With average EP of 90 days, the
impact will likely be small
• Maybe spillover from STD into
LTD:
– Complication/residual physical
effects
– M&N
2006 General Meeting
Assemblée générale 2006
Financial Impact – Group Dental
Slide 43
• Some expected claims to go down
temporarily… back to avoidance of
large gathering places
2006 General Meeting
Assemblée générale 2006
Financial Impact – Group Medical
Slide 44
• Claims will likely increase for
hospitals, drugs & OOCM?
• Who will pay for a vaccination
program?
• Travel advisory
• Borders may be closed and
repatriations not possible
2006 General Meeting
Assemblée générale 2006
Financial Impact – Group AD&D
Slide 45
• As the cause is accident-related,
should have no impact?
2006 General Meeting
Assemblée générale 2006
Financial Impact – Group CI
Slide 46
• Is it plausible for those that are
seriously infected to go into a
Coma, Paralysis, damage to
hearing…?
• How does this translate into
additional morbidity rate?
2006 General Meeting
Assemblée générale 2006
Group Insurance – considerations
Slide 47
• Stop writing new business during a
pandemic?
• Do we expect sales to go up during
a pandemic?
• Do we expect to increase rates to
mitigate the risks or recoup losses?
• Do we charge more now and build
up a pool for a possible pandemic?
Session Content
•
•
•
2006 General Meeting
Assemblée générale 2006
•
Slide 48
•
•
General overview of Avian Flu (H5N1)
Impact of a Pandemic on the economy and businesses
BCP & risk management for a Pandemic
Pandemic planning – info from OSFI, CLHIA , AMF
Impact of a Pandemic on Group Benefits – what one
insurer has tried to quantify
Modeling of a Pandemic scenario & reinsurance
solutions available
By Philippe Trahan
•
•
Conclusion
Q&A
2006 General Meeting
Assemblée générale 2006
Meet H5N1
Slide 49
2006 General Meeting
Assemblée générale 2006
Risk Transfer Solutions
Slide 50
•
Insurance
•
Reinsurance
•
Capital Market
1.1 Life Insurance Solutions
2006 General Meeting
Assemblée générale 2006
• Bird Flu Life Insurance
Slide 51
• Beijing Minsheng Life Insurance on November 7th was first to launch a
policy that would pay the insured if they are infected by the H5N1 virus. Four
days later, Shenzhen-based Hua-an Property Insurance followed.
• The policy costs 100 yuan for each 200,000 yuan of compensation. It is valid
for a year for anyone aged 3 to 70.
• The pricing Implies an annual H5N1 death rate of less than 0.05%.
• Industry solution?
• A Vietnamese chicken retailer has attached a 100 million Dong certificate to
each bird sold and which will pay the indemnity offered to anyone who catches
the bird flu virus after eating his product.
• Risk Mitigation?
• In Vietnam, marksmen are being hired to shoot pigeons and other birds
within the city proper in order to stave off the bird flu virus. Each sharpshooter earns $7 a day.
• The marksmen shoot with BB guns and admit that, although the birds'
carcasses are to be destroyed, they can make more money selling the birds
to restaurants that specialize in roasted pigeons.
1.2 P&C Insurance Solutions
2006 General Meeting
Assemblée générale 2006
• By and large, the Avian Flu exposure of traditional P&C lines of business is
perceived to be limited to a few well-defined parts: event cancellation, workers
compensation of healthcare employees, some liability and food industry specific
perils.
Slide 52
• One London Underwriter has come up with the Outbreak Extra Expense
Coverage, specifically designed to protect Canadian small business from business
interruption due to a contagion such as Avian Flu:
– The coverage provides for extra expenses in the event a business premises is
closed or quarantined by a public health official.
– The use of the insurance proceeds are determined by the policyholder and can
be used for a wide variety of loss events that could accompany a quarantine and
closure, including income, payroll, communications, public relations cost,
clean-up and more.
– The closure can be for a wide-variety of contagions: SARS, Avian Flu,
Norwalk, Legionnaires and many other viruses and bacteria. It also includes a
"workplace violence" component that provides coverage for such an event that
closes a business.
– Limits range from $5,000-$50,000 per day for a maximum of 30 days.
2. REINSURANCE SOLUTIONS
•
Issues
–
2006 General Meeting
Assemblée générale 2006
–
Slide 53
•
Pricing
Capacity
Solutions
2.1 REINSURANCE ISSUES
How do you price it?
•
“Unknown” aspect forcing reinsurers to be
cautious.
2006 General Meeting
Assemblée générale 2006
–
–
•
Modeling
–
–
•
Credibility has been dented
Data quality
Data, or lack thereof
–
–
–
Slide 54
Age group impact
No consensus on severity
Few historical precedents
Variability of historical exposure
Cause of death
2.1 REINSURANCE ISSUES
Capacity is limited
•
Life reinsurers
2006 General Meeting
Assemblée générale 2006
•
Slide 55
•
•
Already concerned about their assumed pandemic
exposures
Correlation with equity markets
P&C reinsurers
•
•
•
•
•
Limited geographical diversification available
Pandemic is not an accident
Minimum return on capacity pricing
Data and modeling
Correlation with equity markets
2006 General Meeting
Assemblée générale 2006
2.2 REINSURANCE SOLUTIONS
Slide 56
•
Proportional
•
Traditional Excess of Loss
•
Structured
•
Abnormal Mortality Stop Loss
2.2 REINSURANCE SOLUTIONS
Traditional Excess of Loss
•
Pays if :
all death and/or disability/sickness claims
exceed retention;
AND
– WHO declares a phase 6 pandemic
2006 General Meeting
Assemblée générale 2006
–
Slide 57
•
Covers all claims paid during 12
months following WHO trigger
•
Structured to protect solvency
2.2 REINSURANCE SOLUTIONS
Traditional Excess of Loss
•
Need to determine cause of death
2006 General Meeting
Assemblée générale 2006
–
Slide 58
–
Adjudication costly and contentious
Indirect claims are not covered
•
Limited reinsurance capacity
•
Reinsurance credit risk
2.2 REINSURANCE SOLUTIONS
2006 General Meeting
Assemblée générale 2006
Abnormal Mortality Stop Loss
Slide 59
•
Coverage attaches between 120% to
150% of expected claims during the
period.
•
Treaty period varies between 1 to 3
years
•
Covers all causes of deaths
2.2 REINSURANCE SOLUTIONS
2006 General Meeting
Assemblée générale 2006
Abnormal Mortality Stop Loss
Slide 60
•
Comprehensive
•
Simple
•
Limited reinsurance capacity
•
Reinsurance credit risk
2.2 REINSURANCE SOLUTIONS
2006 General Meeting
Assemblée générale 2006
Structured Risk Reinsurance
Slide 61
•
High upfront cost (20% of limits).
•
80% No Claim Bonus (Net 4%)
•
3 year term.
•
The net 16% cost is held in interest
bearing claim fund. Does not need to
be directly paid to reinsurer
2.2 REINSURANCE SOLUTIONS
2006 General Meeting
Assemblée générale 2006
Structured Risk Reinsurance
Slide 62
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Limited reinsurance capacity
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Risk transfer acceptance
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Reinsurance credit risk
2006 General Meeting
Assemblée générale 2006
3. Capital Market Solutions
Slide 63
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Securitization
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ILW
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Others
3. Capital Market Solutions
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Securitization
Abnormal Mortality Cat Bond
Few placed: Swiss Re, AXA Re, Scottish Re
Vita Capital Ltd.
Vita Capital II Ltd.
Sponsor:
Swiss Re
Swiss Re
Domicile:
Cayman Islands
Cayman Islands
$400 Million
$362 Million, $2B shelf registration
2006 General Meeting
Assemblée générale 2006
Deal Name:
Issued Amount:
Interest Spread:
Attachment Probability:
Expected Loss:
Exhaustion Probability:
Covered Area:
Reporting Agency:
Trigger Mechanism:
B
$62 MM
LIBOR+1.35%
7.7 bps
1.6 bps
0.3 bps
Ratings:
C
$200MM
LIBOR+0.90%, LIBOR+1.40%
0.15 bps
0.03 bps
<0.01 bps
1.65 bps
0.73 bps
0.15 bps
D
$100MM
LIBOR+1.90%
7.55 bps
4.11 bps
1.65 bps
23.44 bps
14.88 bps
7.55 bps
United States, United Kingdom, France,
Switzerland and Italy
United States, United Kingdom, Germany,
Canada and Japan
US Center of Disease Control and Prevention
National Center for Health Statistics
United Kingdom: Office for National Statistics
France: Institut National de la
Statistique et des Études Économiques
Switzerland: Swiss Federal Statistical Office
Italy: Istituto Nazionale di Statistica
US: Center of Disease Control and Prevention
National Center for Health Statistics
United Kingdom: Office for National Statistics
Germany: Statistisches Bundesamt
Canada: Statistics Canada
Japan: Ministry of Health
Combined Mortality Index, Trigger is 130%
Trigger is 125%
Issue Date:
Maturity Date:
Calculation Agent
Slide 64
A
$0 MM
Series
December 5, 2003
January 1, 2007
Milliman USA
S&P A+, Moodys A3
Combined Mortality Index
Trigger is 120% Trigger is 115%
Trigger is 110%
April 13, 2005
January 1, 2010
Milliman USA
A-/Aa3
BBB+/A2
BBB-/Baa2
3. Capital Market Solutions
Securitization
What event would have triggered Vita 2?
2006 General Meeting
Assemblée générale 2006
Class D
Slide 65
Influenza Epidemic (1918)
World War II (1939-45)
Korean War (1950-53)
Vietnam War (1967-74)
AIDS (1995)
September 11 (2001)
European Heat Wave (2002)
Class C
✔
✔
✔
X
X
X
X
X
X
X
X
X
X
X
Class B
X
X
X
X
X
X
X
Class A
X
X
X
X
X
X
X
3. Capital Market Solutions
2006 General Meeting
Assemblée générale 2006
Industry Loss Warranties
Slide 66
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Typically found for P&C catastrophes,
notably for retrocession business
•
Pays if a pre-defined index is exceeded
•
•
Doesn’t take into account actual losses to
ILW holder
What index should be used?
3. Capital Market Solutions
2006 General Meeting
Assemblée générale 2006
Others
Slide 67
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Swap
•
Sell the market short
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Session Content
•
•
2006 General Meeting
Assemblée générale 2006
•
•
•
•
•
•
Slide 68
General overview of Avian Flu (H5N1)
Impact of a Pandemic on the economy and
businesses
BCP & risk management for a Pandemic
Pandemic planning – info from OSFI, CLHIA ,
AMF
Impact of a Pandemic on Group Benefits –
what one insurer has tried to quantify
Modeling of a Pandemic scenario &
reinsurance solutions available
Conclusion
Q&A
2006 General Meeting
Assemblée générale 2006
Conclusion
Slide 69
• Global implication –– your
business will be affected directly or
indirectly
• There is opportunity here as well…
if you can stay up and running
when others cannot
• Be prepared, don’t ignore, don’t
obsess